To accumulate wealth, along with working hard to earn money, you should also put your money to work for you to generate more money, which you may do through proper investments.
Accumulating wealth is the dream of everyone, be it for living a luxurious retired life, buying that dream home, high-end car, going for lavish world tours or for doing charity. But to accumulate wealth, along with working hard to earn money, you should also put your money to work for you to generate more money, which you may do through proper investments.
There are may investment avenues available that are suitable to fulfill different financial goals depending on what financial goals to be achieved, time available to reach the goal, current resources, how much may be invested on regular basis and the ability and need to take risks.
Despite all other things like financial goals, duration of investment, resources, ability to invest remain same for two or more persons, they would take different investment avenues or a combination of avenues depending on their emotional quotient to take risks despite having need to take same risks.
Some persons are risk averse and they don’t like to see the principal invested going down at any point of time and hence stay away from equities as the money invested in equity fluctuates along with ups and downs in equity markets although such fluctuations provide opportunity to generate more returns in long term. Negative short-term values of investments in volatile markets make them jittery and keep them involved in fixed-return instruments that produce lower long-term returns than equity.
On the other hand, some persons love to take risks and don’t mind if value of their investments go down in short-term and are even prepared to suffer some losses to achieve higher long-term returns.
While the risk-averse persons miss the opportunity to generate higher equity returns by staying away from market-linked products, risk takers often take unduly high risk to end up losing money, especially when they follow the herd and invest too much in high market.
More than risk takers, the herd behaviour hits the persons more who are neither risk averse or risk takers, as going by the story of substantial gains by existing investors, they enter the high market out of greed and pull their money money out when the markets enter correction phase out of fear, thus suffering substantial losses. While the investors, who are not afraid to take risks, remain invested even in the low market and avoid the notional loss turning into actual loss, risk-averse investors remain unaffected by all the market buzz and stay away from it.
Hence, controlling emotion very important in the journey of wealth creation as taking undue risk may result into negative return, while taking no risks may result into bigger risk of missing the financial goals. So, you need to control your emotions and start investing early and instead of trying to time the market, make regular investments through systematic investment plan (SIP) which would weather the storm in equity markets by making investments in both high and low markets.
If you are not very confidant to take financial decisions and don’t have knowledge, experience and time to make proper investments and review them periodically, take help of an experienced financial advisor, who will help you in determining the financial goals through proper financial planning and would also determine how much you need to invest in which asset class for how long to achieve the goals. It will also ensure a tension-free guided journey towards fulfillment of your financial goals as you need not apply your emotional quotient to make any mistake in taking financial decisions.