A large section of the world invests in the stock market to make money. Generally, long term investors aim to have enough money to cover their necessary expenses and to lead a comfortable retired life. But to create long term wealth, investors need to follow a couple of rules in order to achieve their life goals comfortably.
Here are some of the steps that are rational and easy to implement for wealth creation in India:
- Saving is essential Saving is one of the first steps for wealth creation in India. A person must at least save 15% of his salary, throughout his career. This is especially for individuals who starts earning at the age of 25 and plans to retire in four decades. Those who are unable to spend even this limited amount are considered to be over spenders. A smart way to increase your savings is to avoid buying things you don’t need, otherwise you have to sell things you actually need.
- Knowing what you own Irrespective of the age, this is one trait that every investor must have. For making long term money, it is important to have an understanding of some simple theories, including different dynamics of asset classes, their risk & reward-ratios and basic valuations metrics. If you have invested in the stock market and things didn’t work out as planned, try to learn from your mistakes and avoid committing them again. Educating yourself about the basics of company financials is extremely important, especially for novice investors. Besides, you must know how to determine the best stocks to buy.
- Increasing your knowledge about the financial history Improving economy and subsequent earning levels can make one analyse that stocks prices would move in tandem. However, real money is made in opposite situations. For instance, future returns tend to be higher, especially if investors buy when the market sentiments are not very positive.
Undoubtedly, it is quite difficult for investors to identify market bottoms. However, investors can improve their odds as well as market returns by investing when market assessments are way below the long term averages. Taking prompts from broader market valuations can prove to be a good substitute for the market sentiments.
- Saying ‘no’ is essential at times It is generally seen that investors feel confident when markets are doing well. However, if you have a better understanding of the various aspects of behavioural finance, you would be able to make better investment decisions. Sometimes it is necessary to say ‘no’ to certain investment decisions. This can prove to be a better call than buy calls.
While it is largely aimed at individuals who are in their 20’s, most of these above-mentioned pointers need to be implemented by investors of all ages and have good wealth creation in India.
Author: Hardik Sharma
A graduate in Financial Accounting and Business Analyst by profession from New Delhi, India. A writer, stock market consultant, and small business operator. Sometimes, all at the same time. I enjoy driving and love sea-food.This author has published 2 articles so far.