You don't have to be a genius to achieve your investment goals. But if you're a knowledgeable, disciplined, and confident yet humble investor, you'll end up looking like one.
Follow these 12 Principles and you're set for life with regards to your investments.
1. Develop a financial plan
Identify your goals and design an investment program to reach them. Be conservative in your projections.
2. Become a disciplined saver
Learn to live below your means. Make it a habit to put away money every month. If you aren't naturally disposed toward saving money, find ways to trick yourself, such as automating your savings program.
3. Start early and continue
Continue investing in both good and bad times.
4. Focus on your Net-worth
How much of the net-worth is liquid? Return on net-worth is more important than return on investment.
5. Control costs
Avoid instruments with a high expense ratio.
6. Manage risk
Create a portfolio that will enable you to sleep peacefully at night.
7. Be a buy-and-hold investor
Constant trading will not take you to the dreamland. You cannot sow something today and reap tomorrow. A seed has to go through different seasons before it turns into a fully grown tree and starts bearing fruits.
8. Avoid fads and can't miss opportunities
Be unemotional while investing. Protect your capital. A single mistake is enough to ruin everything. Products are the last thing while investing. Follow the process.
9. Focus on what you can control
You cannot control the world outside such as constant news, etc. Purposefully ignore it. You can control your income, savings, and expenses. Simple!
10. Maintain equanimity
Keep emotions under control. Don't get swayed away. Uncertainty is life- embrace it.
11. Review investments
Frequently (say once a year) review your investments. Make sure your goals are aligned with your investment and cashflows.
12. Define enough
Know when you have enough money to meet your goals. You will be content, and more importantly, far less likely to reach for more and take unnecessary risks.
The author is Founder and Catalyst at Aaditya Chhajed Financial Services and can be reached at aadityachhajed@acfas.in
CAclubindia
