Many people think that once they create ample wealth than they’ shall remain wealthy for the rest of their life, but this is not true. Getting wealthy is feasible if you specialize in wealth creation practices but staying wealthy is feasible only if you recognize the way to preserve the wealth you created.
Creating wealth requires having a concentrated portfolio, taking High Risks, active personal involvement and some Luck. On the contrary, preserving wealth requires a diversified portfolio, lower risk, Passive involvement and a disciplined investment process. The strategies for preserving wealth are the alternative of those for generating it.
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Here are a few action items to create a corpus out of your investible surplus…
1. Plan for financial growth.
One who wants to create wealth to attain their financial goals timely must have a growth mindset. you need to think about generating income from multiple sources and investing it strategically. Also, one must get out of their comfort zone and look for new options for investing with available surplus income. For example, you can start for wealth accumulation for goals such as a car purchase or for the down payment of your house purchase, even you can start planning for long-term goals such as child marriage, retirement, etc.
As the saying goes “What gets measured gets managed”. Fixing your goals in terms of values like the total cost involved in it, time in hand and how much risk are you able to take for the same; helps you to plan better to figure towards that goal. For example, once you start earning, you can very well plan in advance at what age you want to get married, buy a house, pursue master’s, how frequently yo go on vacations, etc. As all these events require a financial arrangement for the same so you would be in a better position to attain the same if you had a Goal planning roadmap.
3. Planning Strategically.
“If you fail to plan, you plan to fail.” The Same thing applies to your financial planning process also, If you wish to attain your financial goals timely you have to plan your investments in a strategic manner. For that, you must remember of the available financial products, their market performances and a future growth projection. Nowadays, people even connect with a financial expert to avail services like wealth management and goal planning, because it is best to take advice from the subject matter expert.
As every individual’s return expectation from an investment differs, the same way everyone comes with a different level of risk appetite for investing. Some are often conservative and prefer safe and fixed returns funds, some will be moderate and prefer a hybrid of debt & Equity and a few are often aggressive investors who prefer a larger size of equity in their portfolio. One must bear in mind, what level of risk they’ll take towards the fulfilment of certain goal achievement.
5. Allocating Assets.
While planning for your goals, you need to do a correct allocation of your existing assets. One correct way of doing this is often by considering the character of the goal if it’s rigid it’s better that you just allocate a secure asset vis a vis if the goal is of flexible nature then you’ll be able to allocate a combination of secured & unsecured assets.
Also read: Here is how to get out of the rat race and achieve your financial goals
You must have met many people who guide in several ways to form wealth but only a few speak about a way to hold on to it wealthy position. you would have to be more conscious and suspicious while managing the cash or portfolio once its built. Mindset plays an enormous role in managing your investment portfolio. One must think with the survival mindset for wealth preservation, instead of constantly making changes to the portfolio and bringing it to a risk of loss.
Now let’s discuss about 5 practices following which you’ll be able to create such right mindset to secure your wealth:-
- Shift of focus.
Once you have created considerable wealth by taking calculated risks and analyzing market situations, you have to alter the approach of playing aggressive. You have to shift your target on portfolio protection. You should make your investments in such a way that no market change can bring uncertainty of you achieving future goals. you should be calm enough to remain in the identical position and let compounding do its work.
- Be little paranoid.
When we plan for any goal, we are optimistic and assume things to work in our favour, rather we should always think in a pessimistic way and plan for the long run. This way we will be hopeful for the best but prepared for the worst,
- Playing safe.
You should approach to any possible changes in your portfolio with a concept of constructing it to last till your anticipation and not with the view of only seeing it grow in size.
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- Anyone can act Rich.
Many people have a thought process of shopping for luxuries and things which help them to stand out socially, once they have enough money in hand. But the fact is you should measure life with a minimalistic approach if you wish your corpus to last till your life span. One easy way of doing this is often by measuring every spending you’re doing and then categorizing it into needs and leisure and so thinning out unnecessary items. For example, the very well-known boxer “Mike Tyson” after making the great fortune of $300 million, ran into debt of $40 million in the year 2003 and he had to file bankruptcy also. All this happened because he went on spending on unnecessary ultra luxuries items and did not start with investments.
- Being disciplined.
You need to be more disciplined in your investment management to mitigate the effect of luck. you’ll be able to achieve this by setting a portfolio strategy & its rebalancing with the view of achieving long-run success. Thomas Row Price Jr. is considered as “Father of Growth Investing”. His investment philosophy was that investors had to put more focus on individual stock picking for the long term. Discipline, process, consistency, and fundamental research became the basis for his successful investing career.
Getting money requires taking risks, being optimistic, and putting yourself out there. However, keeping money requires the opposite of taking risks. It requires humility, and fear that what you’ve made can be taken away from you just as fast. Getting Money is one thing. keeping it is another .
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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Also read: SIP (Systematic Investment Plan) could be the key to your wealth creation