4 WAYS TO BECOME WEALTHY

4 WAYS TO BECOME WEALTHY

Before going through the article, do some Financial Planning for yourself, assess your risk profile.

1. INVESTING WITH A SPECIFIC GOAL :
Most Investors invest without any specific Target/Goal in mind. They do invest in Quality Assets but sadly fail invest without any Clear Targets in Mind.
Clearly decide when and why you need the money., and how much will you need.
Prioritise your wants, needs, comforts, luxuries. Make a list of major goals which you visualise for the future, be it your car, home, child’s marriage, etc. Now, prioritise this list. Also read http://goodfundsadvisor.blogspot.com/2009/03/my-target-1-crore-in-10-years.html

It is easy for an Investment Advisor to show you the Right Assets if you specify your Target/Goal. Investing in Debt Funds for your Child’s Marriage is a foolish thing, but at the same time investing in Debt Funds for Next Year’s School Admission is a Wise Thing. Thus, it is imperative to invest with a Specific Target in Mind.
If you have more time to reach a target, then equities is the BEST avenue for you, as equities tend to give you higher retursn over the longer period
Also read http://goodfundsadvisor.blogspot.com/2009/03/retirement-planning-and-sons-education.html

2. INVESTING IN THE RIGHT ASSET CLASS :
Investing your hard money just to save taxes and making some smart investments in the right assets. It is to do more with the Asset Allocation.

It is always advisable to invest in a Mix of Varied Assets like PPF, Equities, Gold, Fixed Deposits, Property, Insurance, etc. Overexposure/Underexposure to Any and All Kinds of Assets should be Avoided. For Long Term, Equities are the best avenue of Investment.
Studies have shown that getting the Right Asset Allocation contributes more than 90% to the overall Performance of a Portfolio in the Long Run while Security(Equity) Selection contributes less than 10% !!!!.
The right mix of the assets will ensure that your money works hard for you and beats inflation hands down always!!
Asset Allocation is universally acknowledged method of creating Superior Returns over Long Term.
http://goodfundsadvisor.blogspot.com/2009/08/investment-portfolio-advise.html

3. AVOID MIXING INSURANCE WITH INVESTMENTS

Even Educated investors tend to invest in Insurance as their only source of Investments whereas it is well known Fact that Insurance is the Costliest way of Investment. Insurance is purely for sake of Protection if any untoward event happens to the Earning member of the Family.
The best Insurance is the Term Insurance. Agents avoid telling you about this because that Term Insurance gets them very very little Commission. ULIPs are a strict no-no. ULIPs leave you with insufficient cover and also give you below par returns. The best option would be to take a combination of Term Insurance and Mutual Funds.
Mutual Funds are the better option thatn ULIPs. Your Insurance Part should be taken care by Term Insurance and all the other features of ULIPs are taken care by the Mutual Funds which are very very cheap due to NO Entry Load., whereas ULIPs have a complex fee structure which could eat into your profits.
However, there are some ULIPs which can be looked into, but only if your investment horizon is over 15 years.
http://goodfundsadvisor.blogspot.com/search/label/Insurance


4. INVEST FOR LONG TERM
Almost Every Investor starts his Investment with Long Term Goal, but very soon as soon he sees the first profits, he becomes Greedy and forgets all about Long Term.
The problem comes when his Short Term Investment starts showing losses, the investor starts withdrawing his Long Term Investment to cover up for his Short Term Investment Losses and ends up failing to Accumulate a Sizeable Amount for his Long Term Goal.
Long Term Investment allows you the benefit of power of Compounding. Sensex, inspite 50% Drop in its value in 2008, has given a Compounded Return of 18% over a period of 30 years!!!! You would do well to read this post http://goodfundsadvisor.blogspot.com/2009/05/shall-i-switch-from-equity-to-debt.html

. Do not get swayed by the Market Movements and change your Investment.

Thus, in conclusion, when you start Investment, take your time, do consult a Good Financial Advisor and Invest in Diversified Assets and Stay Invested for Long Term, allowing your Assets to Perform.

Finally, do review your investments at least once every year.

Best of luck,
Srikanth Matrubai