10 Commandments for long-term investment & Creating Wealth
When the equity markets begin to go down or up, everyone starts talking about the loss or the gain. Timing can be a bad game if you have not understood the micro economic indicators.
Looking at your goals, time horizon, risk profile, and current investments, your financial planner can guide you for the best avenues of long-term investments. But can there be some rules so that, the minimum risk is understood and the maximum expected returns are clear for a disciplined approach to long-term investments.These are my well-defined ten commandments to be followed for getting the best of your long-term goals:
- Long-term investment, patience and a disciplined approach for a minimum period of 10 years is an ideal period, to look at equity mutual funds. When people buy a property, they don't look at the gain in the next one month or one year but look at the returns after five years or 10 years or 20 years; in the same way,huge wealth creation is possible in mutual funds in the long run. Do keep looking at your portfolio to ensure it is under control, being monitored but don't look at it every week or every month as a good period to evaluate is 3 to 10 years
- The markets are going to be volatile as there are cycles and hence the temporary up and down; this should not be considered as profit or loss and hence one should not panic. Declining markets or the Sensex going down, is only temporary, as you cannot forecast in the short run. If your goals are clear, the time horizon is defined and you have made your investments after due diligence, now have patience for the next 10 years and patience will pay you well over this long period of time
- Investors return is not to be understood, as investment return, why? Don't run after performance and returns, be careful about your goals, selected the quality funds as you may go to the good and the bad phases of the markets, on your journey to wealth creation.
- Look at the overlap, between your well-defined financial goals, available resources, and things which you can control. Just ignore all the global garbage news that the media gives you, tries to scare you, about the global economy, as they will only add to the nuisance value and not add to your long-term investments. Be careful, ignore things which are not relevant for you and focus on what you can control, like savings, and investing it for the long-term
- To beat inflation of 5 to 7%, in India you need to invest in long-term equity mutual funds, as an asset class and therefore ensure, that your purchasing power for the future goals are not put at risk. Risk, for not having enough, or adequate exposure to equity mutual funds.
- Ups and downs of the market, give you the opportunity for, doing systematic investment plans or call it as SIP. the opportunity of saving in a monthly mode, is a great ability or a habit, developed for the long-term. Cultivate this habit for maximised benefit to your long-term goals
- You don't have to be a research scholar to find out the best funds, well diversified equity funds need discipline and patience for the long-term investor, who is not running after the performance or the returns. Your financial planner would be assessing this performance or the CAGR, compounded annual growth return, to see that it is performing better than the benchmark return of that funds category. If this is being evaluated and checked, once in a year, do not make frequent changes in your portfolio as choosing returns, purely can hurt the performance of your portfolio in a serious way and can be called as a bad habit in the world of wealth creation.
- In India, various studies have shown, that only 5%, of the investor's population, continue to hold on to their selected funds more than 10 years. Can you be in this 5%? To make it big, big in the world of wealth creation? Are you prepared to be in this premium league? Have you done this preparation under the able guidance of a professional financial planner who is equipped for your journey of wealth creation and who understands the above concepts clearly.
- "Compounding is the eighth wonder of the world, He who understands it, earns it! He who doesn't, pays it"-said Einstein.. Compounding returns work only over a period of time and they may not be any substitute, for time. for example look at one of mutual fund equity category which has grown over a period of five years or more and has given compounding return of more than double the inflation rate but don't look at 1 to 3 years the returns to assess this particular equity fund
- Wealth creation is a combination of time, disciplined activity and patience. Not doing anything, most of the time, for your investments, which are on track, which are being monitored, which are under your control, don't need to be looked at every now and then; in fact, now do nothing and be a long-term investor, a happy long-term investor to be happy and let your investments work for you.
A combination of all the above, under the supervision of an able planner, giving new independent advice can bring you the maximised benefit for this combination. Seek the advice of a professionally qualified investment advisor who is regulated with the country's law, else any of the combination locks missing can result in a deadlock and you may feel, rather be annoyed at the expected outcome of your long-term investments.
Happy investing and wishing you all the best on following the above 10 Commandments for the best in your goal achievement and in your wealth creation
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Till Then, Happy Investing - Taresh -Easy to meet me