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Investing Rules to become Rich


There is no easy way to become rich, and stay rich, but it can be done, if you follow some investing rules... – PowerPoint PPT presentation

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Title: Investing Rules to become Rich

  • There are basically only four roads to wealth
  • You can marry it
  • You can inherit it
  • You can get a windfall (from a lawsuit
    settlement, lottery, or some other unexpected
    good fortune) or
  • You can accumulate it.
  • Most of us are stuck with option 4 - accumulate
  • To do so, we need to understand how to manage
    cash flow .

Live within your means It takes financial
discipline and sensible behavior to successfully
accumulate money and grow wealthy.
Avoid Taking creditsLearning to live within your
means leads to a freer life - debt can be a mean
master instead of a worthy servant. Possibly the
biggest trap out there is easy credit, which lets
us buy numerous things we might not need. Save
first, spend second. If you do so, building
wealth will be a lot easier for you.
Save Aggressively This does not mean "invest
aggressively." Rather, it means making it an
absolute priority to set aside 10 per cent of
your income right off the top, and even more if
your goals tell you to do that. The longer you
wait to start saving, the larger the percentage
of your current pay you will have to save to
reach your goal.
DiversifyNo investment is risk free only a
diversified portfolio can mitigate the risks of
market cycles. We've all been warned against
putting all our eggs in one basket even Warren
Buffett said, "It's better to be approximately
right than definitely wrong." By "approximately
right," he was referring to diversification.
Dollar - Cost Average When buying shares, remove
emotions from your investing by automatically
buying more shares or equity mutual fund units
when they are cheap. Emotional investing gets too
many people in trouble. . Dollar-cost averaging -
by investing a fixed amount in regular intervals
- is the best way to make money in a variable
market over time. Remember, you need a longer
time horizon when investing in the stock market.
Be PatientWarren Buffet says, "The market has a
very efficient way of transferring wealth from
the impatient to the patient." Time in the
market is more important than timing the market.
Understand Volatility Over time, returns from
investments regress to a mean. "Regression to the
mean" simply means that highs and lows will
average out so that your return regresses to a
certain number or range. Understand an
investment's range of returns so you know what to
expect annually, and over time.
Manage your Taxes Have you ever considered how
taxes are your biggest expense in life - more
than mortgage expense, education expense, or any
other expense? So, you must take advantage of all
tax breaks available - each and every single one
of them.
Think before you InvestDon't chase returns
before chasing that incredible return, find out
how the investment did during the last bad market
for that asset class. Find out its risk, and ask
yourself whether you can stomach a bumpy ride
over the long term.
Get Advice from Experts Never underestimate the
value of good advice. A good financial adviser is
like a personal trainer for your finances and can
get you on track and keep you there until your
goals are met. And even more critical than
getting the advice is being sure you consistently
follow your game plan. The greatest problem for
most people is procrastination and erratic
investment behavior. So get started, get advice,
and get going down the road to wealth - and
steadfastly follow through.
Periodically rebalance your portfolio.