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Can you keep your 2018’s resolutions?
Published On , 29 Jan 2018 By TOI
It’s that time of the year when people make their New Year resolutions. It’s true a lot of those resolutions are not met, but that’s no reason for not making some. Here are some investment-related resolutions which could make you a better investor and help you create wealth over the long run.
I’LL NOT SPEND MORE…BUT SAVE MORE
Billionaire investor Warren Buffett had famously said: Don’t save what is left after spending, spend what is left after saving. Take the resolution to follow the Oracle of Omaha and try to inculcate the habit of paying yourself first, before spending. The idea is to set aside certain portion of your paycheck on the day it hits your bank account for saving and investing, and then spend the rest of the money that is left with you. People usually do the reverse. One easy solution is to fix your systematic investment plan (SIP) date as the date next to your pay day. That way you could automatically follow what Buffett has been trying to teach investors who are serious about building wealth over the long term: Even before you can really think about spending a large sum of your paycheck, you have already invested through the SIP route for your long term Goals.
SHOULDN’T BUY THE LATEST SMARTPHONE…BUT CREATE AN EMERGENCY FUND
You may have the desire and also the money to buy the latest smartphone that would set you back by nearly Rs 1 lakh. Think seriously if you really need that phone and how much incremental value would that phone bring in to you. Financial planners say a better option would be to postpone buying the latest smartphone if your existing phone is serving you well and use that money to create an emergency fund. One of the preferred ways of creating a contingency fund is to invest in a liquid scheme of a good mutual fund house.
SHOULDN’T TRADE…BUT INVEST WITH PATIENCE
Billionaire investor and philanthropist George Soros had once said: If investing is entertaining, if you’re having fun, you’re probably not making money. Good investing is boring. Often people buy one or two stock(s) with the hope of making some quick gains. You could make money a few times through such trades but in the long run, do your maths well, and you would find that it’s not you but someone else is making most of the money. Instead be a patient investor, invest regularly, be a disciplined investor and wait for your money to grow into a large corpus. Remember you got your graduation degree after about 12 years of schooling and at least three years in the undergraduate class. Also remember what Paul Samuelson, the famous economist and a Nobel laureate had said: Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
LUMP SUM INVESTING IS GOOD…BUT SIP IS BETTER
Like in many other walks of life, try to bring in discipline in your savings and investments as well. Since you earn your salary, which is an inflow of money, on a regular basis, try to match your outflow of money into your investments also with a similar regularity. Opt for the SIP route of investing for your financial Goals, be it short term, medium term or long term. And any unexpected inflow of money could be invested in one shot. Remember, even if you have SIP in a fund, no one would stop you from investing a lump sum amount in that same fund.
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