Last Updated on Dec 15, 2022 by Anjali Chourasiya
Building wealth is all about growing money to achieve various short, medium, and long-term financial goals. Surely, wealth cannot be built in a day, but it is possible to build wealth over a period of time with a disciplined and consistent approach throughout the investment journey. Building wealth over time is a matter of managing expenses so that savings can be maximised and invested in the right asset class for the long haul. Patience is the key when it comes to long-term investing.
Along with investing regularly, one has to be watchful of investing money in the right way considering factors like inflation, market volatility, contingency requirements, medical emergencies and other uncertainties. Here are five mantras which you can abide by for creating long-term wealth.
- Having a goal-based investment approach – All the wealth-building exercise is generally for an investor to achieve a particular goal in future. Therefore, it is better to align the investment with the financial goal so that an investor can stay on track and make changes if needed. Goal-based investing helps answer important financial questions like how much to invest, where to invest, when to start investing, etc.
Moreover, investing with a purpose enhances investment decisions, and the portfolio gets well allocated to different asset classes to meet the different goals. Goal-based investing is one of the efficient ways to invest money for the long term to meet the end objective.
- Asset allocation is the key – Proper asset allocation helps diversify investments in different asset classes, which helps in risk management and generating reasonable returns. It is important to invest across various asset classes (equity, fixed income, gold, silver) and investment styles (like quality, value and growth), depending on your risk profile and investment objective, which the financial advisor advises. With asset allocation, the aim is to take advantage of all the market cycles and not let the portfolio get exposed to a single asset class.
- There is no right time to enter the market – The markets are volatile, and no one can predict their flow. Therefore, it is better to steer clear of timing the market. The secret to long-term wealth building is spending time in the market rather than timing it. By doing so, the investor rides out the possibilities of uncertainties in the market. One should focus on creating a sustainable investment strategy, timely rebalancing and choosing the right investment (with the help of financial advisors) to achieve the goal.
- Stay invested – It is always suggested to choose the right investment depending on the investor’s risk profile and stick to it for a long period. The performance of a quality investment generally can withstand economic shocks in the long term across several investment cycles. In the short term, a business might underperform due to various factors, but if the fundamentals are strong, an investor should have patience and let the revival happen.
The fall in quality businesses could more likely be due to a host of reasons that have nothing to do with the market’s viability. Many times, when a stock loses a margin of its value, the price is driven by emotions and not by fundamentals.
- Invest systematically and stick to your investment strategy – One way to build an investment corpus over a period of time is by regularly investing at a set interval. This brings discipline in investing systematically for a long period. The benefit of investing at a scheduled time is that an investor need not look at the volatility in the market. It also gives the advantage of compounded returns which can help beat inflation. It is ideal to have invested through SIP on an incremental basis every year. SIP helps investors derive profit even in the low market phase through rupee cost averaging and the power of compounding. It ensures that more units are bought when the markets are low and lesser units when they are high.
Everyone can build wealth for themselves. However, it is a process in itself. Mutual fund products, both active and passive, provide a wide range of options for investing in different asset classes (Equity, Fixed Income, Gold ETFs etc.) that give a different aspect to the portfolio. It is advisable to start planning and investing for the long-term financial goals at the earliest to be in a position to maximise returns. If a large corpus is to be built over the long term, don’t wait for the market conditions to turn favourable.
Once the investing journey starts, avoid getting swayed by the market noise and stay invested until the envisioned goal is achieved. Investors should invest, keeping three things in mind – investment tenure, risk appetite and the end goal to achieve that particular investment.
Disclaimer: This press release represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.
The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone. Axis Mutual Fund will not be liable in any manner for the consequences of such action taken by you. The information contained herein is not intended as an offer or solicitation for the purchase and sales of any schemes of Axis Mutual Fund.
Past performance may or may not be sustained in the future.
Stock(s) / Issuer(s)/ Sectors mentioned above are for illustration purposes and should not be construed as recommendation.
Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.
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