Five Habits For Successful Wealth Creation

Investment is necessary for wealth creation to fulfil life’s various financial goals. However, it is equally true that a majority of investors fail to be successful in creating wealth. And it is not necessarily because of the market conditions or macro economic factors. Rather, investors’ irrational behaviour and their habits are largely responsible for not letting them become successful wealth creators. That said, wealth creation is not a rocket science which needs special skills, expertise or sophistication. 

Rather, simple investment-related measures and goal-focused thought processes are the factors required to be a successful investor. These are possible when one has good investment habits and practically realistic perceptions about wealth creation. Given below are five habits, if adhered to, can help investors reach their financial goals in a systematic and effortless manner. 

1) Wealth Creation is Long-Drawn Process - First and foremost, investors should acknowledge the fact that wealth creation is a systematic process wherein investment takes time to bear fruits. In other words, wealth creation is not a gambling exercise to make quick money; instead it is a long-drawn process and one should be mentally prepared for the same. Else, large expectations within a short span may disappoint investors leading to the end of their wealth creation journey even before it takes off. 

2) Wealth Creation Involves Imperative Ingredients - Every process has certain basic ingredients without which it cannot achieve what it is meant to. Similarly, while embarking on wealth creation process, certain basics of investments cannot be ignored. n Discipline: This is the most important requirement for a fruitful wealth creation journey. Discipline in investment is of paramount importance as it involves continuity, systematic approach and regularity. Irrespective of the market conditions, investors should exhibit a disciplined approach with investment commitments. n Asset Allocation: Often investors tend to develop affinity towards one asset class and end up pouring their hardearned money into that one asset class, leading to asset concentration risk. This should be avoided during the entire course of investment by simply adhering to one’s decided asset allocation. Given the fact that asset classes like equity, debt, gold and real estate have distinct market cycles and valuation dynamics, asset allocation ensures your investment is suitably spread across multiple asset classes to offer you the benefit of all asset classes with optimum returns. n Evaluate Risk and Rewards: Before investing one should have a clear understanding about the risks involved in every asset class and the subsequent rewards. Generally, higher the risks, greater are the long-term return. At the same time, investors should also evaluate their own risk appetite before choosing asset classes. 

3) Be Goal-Oriented - Investments must be goal-oriented, period. Without a financial goal, often the investment journey tends to go haywire. Therefore, it is in investors’ best interest to do goal-based investments. One can have several goals such as buying a car, a family holiday trip, children’s higher education, their marriages, buying a house and retirement, among others. Investment decisions should be a function of such goals and one needs to remain goal-focused till each such goal is reached. Tag each investment with a goal to keep you anchored with investments. 

4) Avoid Noise - Investment, especially equities, tends to generate a lot of noise during the course of one’s wealth creation journey. Often, too much noise derails the investment process. Investors over time should learn the art of cutting out noise and avoid falling in the trap of news flow and rumours. At such times, staying focused on goals can help turn a deaf ear to the noises around. 

5) Maintain a Realistic Approach with Patience - While patience is the key to successful wealth creation, investors should maintain a realistic approach when it comes to return expectations. Since markets are prone to volatility and cycles, expecting high yield every year is not a possibility. Instead, one should be comfortable with a few years of low or negative returns. Losing patience during such lean times may result in panic-led imprudent investment decisions which defeat the very purpose of investment and abruptly stop the wealth creation journey. 

To conclude, having a good set of investment habits plays a critical role in meeting long-term financial goals in a comfortable manner. By just adhering to these principles listed above one can experience a happy and goal-fulfilling investment experience while leaving a legacy behind. 

Mukesh Kumar
AMFI Registered Mutual Fund Distributor

The writer is AMFI Registered Mutual Fund Distributor