It is rightly said that slow and steady wins the race. In finance, this saying definitely holds true. For long-term wealth creation, investors need to have consistency in investment and patience.
There are many wealth creating challenges that you as an investor have to overcome to successfully implement a long-term wealth plan. Let’s look at some in detail.
How to create long term wealth
- Financial advisers recommend that you should always have a plan for your idea of return from a long-term investment. Suppose you wish to get a 15% return on your investment, you have to plan your investments in various channels accordingly. Investing in fixed deposits won’t help you achieve the target. You, therefore, need to diversify your funds and consider options like stocks and mutual funds. This is one of the challenges many investors face while making investments, as investment channels matter a lot based on returns and profit percentage.
- You should avoid withdrawing prematurely. In reality, however, many investors in times of need tend to partially withdraw their investments thinking that they will recover the same in no time. But a reinvestment is rarely done. Hence, you should avoid altering your investments as much as possible.
- Compounding interest is one of the biggest factors responsible for growing your wealth in long term. And to take advantage of this, consistent investment is required. When invest in mutual funds, opting for a Systematic Investment Plan (SIP) is a way by which you can benefit from the power of compounding.
- Many investors worry about the returns and their principal investment when the stock market is turbulent. There are phases of inflation and deflation that the market goes through and you as an investor are advised to hold your investments. However, some withdraw prematurely for fear of losing their principal investment or in greed for huge profit from the market.
- Redirecting investment is also a concept that is popular among investors to increase their profit but many fail to achieve it. Investors withdraw their investment but won’t reinvest the same amount. This, in the long term, reduces the amount of profit an investor can make. Thus, it is advised to make a redirection of an investment carefully.
You as an investor should keep in mind these 5 challenges and try to avoid them.
- Always plan your long-term wealth creation keeping in mind the return on investment
- Never withdraw your investment, be it partial or full
- Always upgrade your investment with consistency
- Do not act impulsively when you see a turbulence in the market
- Be cautious when redirecting investments
Following these guidelines is crucial for you to be able to reap the benefits and achieve the target of long-term wealth creation.