Five ways to grow your wealth

There’s no secret recipe or winning formula for being a successful investor. But, if you follow a handful of basic steps (and avoid a few common mistakes), you’ll start stacking the odds in your favour. Here are five simple rules to help you grow your wealth and move towards securing your financial freedom. 

1. Have a plan, and stick to it

What are you investing for? Decide on a goal – whether it’s a new home, your child’s education, your retirement, or whatever else – and figure out what you’ll need to do to achieve that target. Work out exactly what your monthly contributions should be, your time horizon, and all the other factors that you’ll need to know. Once you’ve defined your investment goal and the steps you’ll need to take in order to reach it, the next step is to choose a fund that matches your investment profile. Then the challenge is to simply stick to your investment goals and not get distracted by short-term market volatility or disturbing daily news around you. 

2. Be patient

You’ve probably heard it before, but time in the market is almost always better than timing the market. Sticking to your financial plan will inevitably require time and patience. After all, investing is a long-term game, so you’ll need to sit tight and keep your focus, through bull markets and bear markets. By all means, check in on your portfolio regularly to confirm that you’re on track (or to see if you need to make any changes!), but – as your financial adviser will tell you – avoid any knee-jerk reactions. Don’t allow short-term ebbs to distract you from your long-term goals. As the legendary investor Warren Buffett has said, “The stock market is a device for transferring money from the impatient to the patient.”

3. Take the emotion out of it

Fear, anger, greed, excitement, panic… Your worst investment decisions are usually made when you let your emotions guide you. Investing should be about hard facts and figures; not gut feel or emotional responses. As humans, we’re biologically hardwired to look at past performance as an indication of future returns, but it’s important to remember that past events are by no means a guarantee of future returns. That’s why greed and fear are especially damaging emotions, as they trick you into running away when markets are down or chasing top performers. Investment guru Jim Cramer said it best: when it comes to investing, “bears make money, bulls make money, and pigs get slaughtered.”

4. Look out for opportunities

There are always opportunities to invest, especially when markets are down. You just need to know where – and how – to look for them. Scary news headlines are usually a reflection of short-term market volatility, and while your focus should be on your medium- to long-term investment horizon, bear markets can present some great opportunities to pick up high-quality assets at a discount. So instead of being anxious when markets are down, rather look at them as an opportunity to add to your portfolio

Continue reading: https://prudential.co.za/insights/articlesreleases/five-ways-to-grow-your-wealth/ 

February 22 2021 By prudential.co.za