Beginning of Every year, most of us listen or read about the predictions be it Horoscope or be it about financial markets. How many of us actually remember these predictions by the end of the year. There are new Ups and new Downs in life every year i.e., be it events, economy, markets etc
For those of you who had been or just started investing into Equities / Equity Mutual Funds, 2017 would have seemed a wonderful decision and for those of you who thought of delaying this decision would have caused a bit of pain of being missed the bus.
Whether you stayed invested or not yet started, few things I would like to re-emphasize at the beginning of the new year. These things all of us should re-read and keep it in our mind through-out our journey of investments irrespective whether these years are good / bad.
- The most important thing is Discipline. Are we investing every month at-least 20% of net income?
- Second most important thing is Asset allocation. Irrespective of Up / Down markets, are we sticking to the plan of asset allocation. Whatever happens across the world’s economy, your next two years of expenses have to be in safe instruments and rest of the money has to be invested in equities for long term. When I say Long term it is definitely beyond 5 years and preferably 10 years & above.
- Third most important thing is managing our Behavior. With the advent of social media and easy accessibility to information, we have overload of information all over the place. While it seems good to know a lot of things, it is wise to understand how we respond to this information overload. Changing the investment plan in the mid-way as a reaction to the information overload can be dangerous to your financial health. Sticking to the investment plan and staying invested for long periods of time is the only easy way of benefiting from Power of compounding.
- Fourth most important thing is having a plan in writing. Plan of your expenses for next 1 / 2 / 3 / 5 yrs, Plan of Asset allocation. Automating these investments using SIP/STP.
- Fifth most important thing is to understand a bit about relationship between Risk & Reward. As you know there is nothing called as free lunch. In investment world too, every increase in return comes from increased risk of the asset invested into. Hence it is important to understand one’s risk taking ability and the ability to withstand volatility and then decide on an asset allocation plan.
Every year has a first day and a last day of celebration and it has been in practise to make resolutions every year. My request would be not to make any resolution but read and re-read these five most important things every day to keep your wealth creation journey healthy & safe.
Here on the beginning of this new year, I wish you a very happy new year and Wish you a Healthy & Safe ( physical / emotional / financial) and joyful year.
Stay safe & Enjoy !!!