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Investing for the long term has its benefits. Most market based and even traditional assets are known to generate better returns over the long term. Especially in the case of SIPs, you will enjoy higher returns thanks to compounding over a long period .
But most investors struggle to get the basics of long term investing right. In this blog, we will walk you through 15 tips that can help you invest with a clear mind and strategy for long term wealth creation.
Each investor has a different goal and risk appetite. Their perception of the investment option may change over time depending on the success it brings them.
But the success or failure of one investment option for one investor does not mean that it will work or fail for you as well. You should consider all your investment options and invest based on your own goals and needs.
Questions to ask your Wealth Coach:
Certain equity investments may be volatile over the short term. You must think about the big picture. The top markets around the world have consistently grown over time. Short term fluctuations are worrisome for day traders but not for long term investors.
Granted, there might be worrying short term trends like the one in March-April due to the pandemic. But investors who stuck with their investments are reaping the benefits now since markets are at an all-time high.
*Note: All facts & figures are as of 09-12-2020. Past performance alone does not guarantee future success. Always consult a Wealth Coach before investing.
How often have you read the disclaimer, ‘Past performance does not guarantee future success’ (it’s even in the paragraph above). The reason behind it is simple… it’s true.
While markets tend to grow over the long term, stocks and even mutual funds are cyclical . What’s best for you today may not be right tomorrow.
Since your goal is to create wealth over the long term, you should do your homework on the trends, data, news, and insights to choose the right options for the future. Of course, you could also download the Cube Wealth app and let it do all the hard work for you.
The thing is, nobody can predict the future. But there are professional wealth coaches and wealth advisors who can help you make the best investment decisions for the long term. This is what they do day in and day out - you cannot possibly do the same level of research and analysis without dedicating a sizable amount of your time.
Investing in the right options for the long term can be hard. Consulting a wealth coach can help you invest and even sell at the right time. In fact when you’re feeling unsure, a Wealth Coach might even be able to reassure you that your portfolio is in good shape and you have nothing to do.
There are no shortcuts to creating wealth. Cube’s wealth coaches recommend investments honestly and transparently. You will only see a short list of handpicked assets on the app.
These recommendations are based on advice from expert advisors like Cube’s MF advisory partner Wealth First and Indian stock advisory partner Purnartha, etc. Speak to a wealth coach to know more.
Banking on one investment can impact your future returns. It can even increase the risk. So diversification becomes important to create more wealth for the future.
If one of your investments loses money, the others may make up for it. Diversify your investments with an open mind based on the risk you are willing to take.
The Cube Wealth app can help you build a balanced portfolio for better future returns based on your preferences. Explore the app to know how this works.
The best way to pay your future self would be to pick the right investment strategy and stick to it. Investors try to change strategies more often than Wile E. Coyote falls from a cliff.
This can be harmful to your financial health. If there are concerns (short term and long term), speak to a wealth coach to make incremental changes or tweaks.
Remember, the right strategy is the one that works for you to achieve what you want.
Saving tax is important. But it may happen that you end up prioritizing saving tax over generating wealth.
One good way to minimize your tax liabilities and create wealth would be to plan early. Don't wait till March to do your taxes, as our founder and CEO, Satyen Kothari, says here.
Instead, speak to a wealth coach to invest in options like ELSS funds which can save you tax up to ₹1,50,000. Since an ELSS fund is an equity-based instrument, it may give returns between 9-14%.
When you’re investing for the long term, it is important to minimize the investing costs such as expense ratios, entry load, exit load, etc. Since you’ll be locked in for a long period of time, the fees that you pay can eat into your profits.
Simply put, higher investment costs are losses that you willingly take. Keep an eye on your portfolio to know how much your investment costs are.
Every investor faces financial regrets. It’s common to hear phrases like, “I should have invested in Amazon back in 2004!” or “Should have added more tech stocks to my portfolio during the dot com bubble”.
The baseline worry lies in either missed opportunities which count as bad investment decisions. Or bad investment decisions themselves. So before you choose to invest (or not) in any option, think it through thoroughly.
While you’re at it, don't accumulate bad debt. It’s one of the worst long term mistakes that you can make. You’re borrowing money from your future self to pay off your current loans or EMIs. You could instead save this money to generate more interest.
It’s important to stick to an investment strategy. But it's also important to go back to the drawing board in certain cases to:
Unless you know how an investment works, stay away from it. Half Baked knowledge can be used to confuse you. It’s better to educate yourself and then revisit the proposition.
For example, assume Mr. 007 doesn’t know that stocks are divided into small-cap, mid-cap and large-cap stocks. Mr. 007 then goes on to allocate 90% of his portfolio to small-cap stocks.
Alarm bells will ring in the MI6 HQ. Not because the world is about to face an impending threat. But because small-cap stocks are very high-risk high-reward investments.
And this is a common mistake. People tend to invest in options based on word of mouth advice. Instead, speak to a wealth coach to understand your investment options.
None of the previous 11 tips will work for you unless you know how to stick to a budget. Long term wealth creation becomes a relay race with one participant… you! Unless you stick to a budget!
If you want to convert it to a marathon with the end of the line in sight, start saving and investing diligently today. If you need help with this, read our blogs on:
a. How to Save Money From Your Salary?
b. How To Manage Your Salary Wisely?
First off, it would be wise to use cash for small expenses. There’s a certain cautiousness that you experience when you physically see your money going away.
And if you’re left with a surplus at the end of the month, speak to a wealth coach to invest that money in options like long term options like blue-chip stocks, equity mutual funds, US stocks, etc.
You'll end up adding and creating more wealth for your future expenses.
Investors who don't let emotions come in the way of their investments fare better compared to emotion-driven investors. This is simply because investments are not similar to your favourite EPL or IPL club.
They work differently and above all, brand loyalty does not guarantee stock or fund success. Take the emotions out to judge investments based on merit and choose options that will make you more money.
Attachment to a brand or a company can be injurious to your financial health. After all, that is the end goal of investing for the long term. Download Cube Wealth to explore long term wealth creation options.
Many investors tend to invest in ULIPs to save tax or create wealth. In the process, they either choose sub-par health insurance plans or ones that don't suit their health-related needs.
That is not the purpose of a health insurance plan. It would be wise to separate your health insurance and long term investment strategy.
Your health is the single greatest asset you own. Treat it as such. Invest in things that can improve the quality of life and help you live longer to reap the benefits of your long term wealth creation strategy.
These 15 long term investment tips can help you achieve your goals. However, it would be best to speak to a wealth coach to understand a strategy that could work for you. You can even download the Cube Wealth app to explore risk and timeframe based investment options.
Watch this video to understand the benefits of long term investing
Top 5 Reasons To Try Our Powerful Investment App!
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