When you start earning, you get surrounded by friends, family , colleagues etc who teach you the importance of savings and investing. They share their investment journey also. If they are making profit, you get tempted to invest in the same way; but that may not help us always. You see many rich people in our society and often think that they must be good investors, but its not necessarily so. A rich person is not always a good investor! Whereas, you can see a person with moderate earnings,achieving his goals with the help of right investments.
So what it takes to be a good investor? Lets See-
- Fix up your goals and invest as per the goals: Its important to know the destination before starting our journey. Here, same applies with investments. You have many responsibilities and goals to achieve in life. Its important to prioritise them and link your investment to such goals. Start investing and remain invested till the end of goal period with a regular review in between.This makes your money work for your own good. Otherwise, simply choosing a product and investing doesn’t help.
- Be vigilant while investing: Its important to know where, how, when you are investing. For this you must read and get basic knowledge about personal finance. Understand your own risk appetite. Consider the tenure of investment as per the goal. Read and understand all product related documents carefully before investing. This will help you choose a right product and follow a right investment path.
- Be regular and disciplined in your investments: Its important to follow discipline and consistency in investments. Whether market is getting negative or some shopping is attracting you, you must not divert your attention from your regular investments. Ones the goals are achieved , you can enjoy its fruits. Investments like ‘Systematic Investment Plans’ makes you a regular investor with discipline.
- Know the difference between ‘Savings’, ‘Investments’ and ‘Insurance’ and act accordingly: Its weird but, People often mix up savings with investments and seek returns from their insurance policy! You need to avoid this. ‘Savings’ means simply keeping aside excess money. If you keep it in your savings account, you will earn basic savings rate of interest. ‘Investments’ means deploying your money in some or the other investments instruments and getting returns as per the working and type of that investment instrument. This is where your money works for you! ‘Insurance’ is the assurance about financial independence of your dependants after your death. Here, you must take a ‘Term Insurance’ for you. Also, you should have a health insurance for you and family. Once you understand the difference between these three, you act wise.
- Keep a check on your expenses: In today’s world, where so many shopping attractions and trends are tempting us for shopping yet we have to pay for our bills and fulfil the responsibilities, its important for us to have a check on our expenses. Nowadays, we all need to follow one equation- “(Earnings – Investments)= Expenses”. So, please avoid unwanted shopping by using credit cards. Don’t try to please people by flashing latest gadgets. Buy what is needed. Remember, Mr Warren Buffet once said; ” If you will buy the things you dont need, you will soon end up selling the things you need the most”! So, please think twice before hitting the’Buy Now’ tab on online sale portal or filling your shopping bucket in a mall.
Right investing and personal finance is a Science and Art! One needs to balance the two to be a good investor! Along with this, its better to have a ‘Personal Financial Plan’ in place with the help of ‘Fee Only’ financial planner.