Aristotle, the great philosopher, once said, "Good habits formed at youth make all the difference".
He also said, "We are what we repeatedly do; success is not an action but a habit".
This could well be true for investments too if we follow these 5 steps repeatedly:-
1. Set Goals -
a) Write down realistic goals and their expected time frame.
b) Calculate money required for each at today’s cost.
c) Compute future cost by factoring in inflation.
2. Create Surplus -
a) Increase savings deliberately by reducing expenses.
b) Change your investment habit from the normal ‘earning – spending = investment’ to more scientific ‘earning – investment = spending’.
c) Calculate your goals with reasonable return expectations.
3. Invest Regularly -
a) Remove investible money even before it reaches you.
b) Opt for compulsory savings products if prone to spending.
c) Opt for regular investment plans to achieve goals.
4. Investment Account -
a) Keep one account for your regular income, like salary, and monthly expenses.
b) Keep another account to use for your investments only.
c) Shift a fixed monthly amount from the first to the second, letting all your investments flow from the latter, and also let all redemptions, interests and dividends flow in it for reinvestment.
5. Asset allocation -
a) Maintain a standard "100 minus age" equity allocation for long-term goals, regardless of market conditions.
b) Review periodically and move a part of equity allocation to debt if the former increases, and vice versa if it decreases.
c) Prevent yourself from being swayed by crowd psychology.
Inculcating simple investment habits is timeless and ageless - all the more so when the "number of retirement years" will soon surpass (if not happened already) the "number of earning years" in our own lifetime - and equity investment formula may then have to be considered as "120 minus age" for a "safe and sound" retirement.
He also said, "We are what we repeatedly do; success is not an action but a habit".
This could well be true for investments too if we follow these 5 steps repeatedly:-
1. Set Goals -
a) Write down realistic goals and their expected time frame.
b) Calculate money required for each at today’s cost.
c) Compute future cost by factoring in inflation.
2. Create Surplus -
a) Increase savings deliberately by reducing expenses.
b) Change your investment habit from the normal ‘earning – spending = investment’ to more scientific ‘earning – investment = spending’.
c) Calculate your goals with reasonable return expectations.
3. Invest Regularly -
a) Remove investible money even before it reaches you.
b) Opt for compulsory savings products if prone to spending.
c) Opt for regular investment plans to achieve goals.
4. Investment Account -
a) Keep one account for your regular income, like salary, and monthly expenses.
b) Keep another account to use for your investments only.
c) Shift a fixed monthly amount from the first to the second, letting all your investments flow from the latter, and also let all redemptions, interests and dividends flow in it for reinvestment.
5. Asset allocation -
a) Maintain a standard "100 minus age" equity allocation for long-term goals, regardless of market conditions.
b) Review periodically and move a part of equity allocation to debt if the former increases, and vice versa if it decreases.
c) Prevent yourself from being swayed by crowd psychology.
Inculcating simple investment habits is timeless and ageless - all the more so when the "number of retirement years" will soon surpass (if not happened already) the "number of earning years" in our own lifetime - and equity investment formula may then have to be considered as "120 minus age" for a "safe and sound" retirement.