Don’t have large capital to invest? Here is how to create wealth by investing small amounts regularly

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Updated: Jan 04, 2019 11:47 AM

You don't have to be born rich to become wealthy, but your instinct and endeavour to become rich would make you wealthy.

creating wealth, rich, Warren Buffett, savings, investments, equity investments, systematic investment plan, SIP, maret risks, small investments, financial planning, long-term investment, tradingTo take saving and investing seriously, you have to control your spending.

You don’t have to be born rich to become wealthy, but your instinct and endeavour to become rich may make you wealthy. According to investment guru Warren Buffett, wealth accumulation occurs over the course of a lifetime. For most of us, the secret to getting rich is to do so slowly—setting aside rupee after rupee and even penny after penny and letting compound interest do its magic.

But you have to take saving and investing seriously, you have to control your spending. “Don’t save what is left after spending; spend what is left after saving,” said Buffett.

So, to accumulate wealth by investing small amounts regularly, you have to follow following steps.

Plan early: To start on the path to prosperity, you have to do you planning first to determine the financial goals and the ways through which you may achieve it withing a given time frame. To generate wealth, you plannings should be of long term, as Buffett said, “It’s not easy to get rich quick.” So, never underrate the power of planning and planting ahead, as suggested by Buffett that, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”

Save and invest religiously: Don’t spend money on buying a thing, which is not necessary, as warns Buffett, by saying, “If you buy things you don’t need, you will soon sell things you need.” It would be not enough for you to save, but you have to invest the money wisely to get good return. Moreover, to let the compound interest do its magic, you have to start the process of saving and investing early with a predetermined goal of meeting your financial targets.

Determine where to invest: Don’t take undue risks and invest your money into something you understand rather than putting it in an area that baffles you, as suggested by Buffett, “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.” However, the best way of making periodic investments is to start SIP in equity. As equity is the only asset class which generates wealth in long run and a systematic investment plan (SIP) proves good for you during market fluctuations due to its inherent benefit of rupee-cost averaging.

Diversify your SIPs: You should not mix investments required for different purposes in different time durations and start separate SIPs to fulfill separate needs. To achieve all the goals through a single SIP may put your plans off the track and you may end up missing your financial targets. Moreover, there are different categories of funds to meet your short-term and long-term targets, which cannot be used interchangeably.

Stick to your investments: Don’t get perturbed by market fluctuations and pull out your money. Study and understand the risk factors before you start investigating, as Buffett said, “Risk comes from not knowing what you’re doing.” So, once you have studied and decided to invest, let the investments continue till your financial target nears, so that you get the benefits of compounding. Trading is not investigating and can’t create wealth for you, but sticking to your investment plans for long term will.

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