A lot of people are taught from a young age that saving money is the most direct path to building wealth and reaching financial freedom. However, while saving definitely is vital for both of these goals, smart investments equally important for making these objectives attainable. Kavan Choksi mentions that money kept in the bank accounts is almost guaranteed to lose value. After all, low interest rates of typical savings account cannot keep pace with inflation. Hence, it is vital to explore smart investment options to generate meaningful returns and grow their wealth.
Kavan Choksi underlines pointers important to smart investing
Smart investing essentially is an extension of the key investment principles and involves making the right investment decisions that meet the specific needs of the investors. These decisions should help them to achieve their long-term financial goals. With the expansive range of investment opportunities available today, it is not always easy for investors to identify a financial product that is well-suited for their goals. Hence, they must give proper thought and deliberation in making the investment plan, and try to follow these pointers:
- Start investing early: People who choose to invest as soon as they start earning do manage to gain an edge over time. Early investing helps in making sure that one has adequate time to grow their money into a substantial corpus fund that can serve them during times of need, and especially after retirement.
- Consistent investments: Investing in a sporadic manner or just once a year is not enough. One would need to invest a certain sum of money every month or quarter for their funds to grow. Having such financial discipline is vital for reaching financial goals. Auto payment options and systematic investment plans (SIPs) are some of the best ways to maintain this practice.
- Build a diverse portfolio: “Never put all eggs in one basket” is an old but extremely relevant saying. Investors should always diversify their investments for managing risk and averting financial losses in case the market becomes volatile. The economic instability caused recently by the Covid-19 pandemic would be among the best examples of the volatile market. During that time, investors who choose to concentrate their money on a single type of stock ended up facing huge losses as opposed to the ones who focused on diversifying their portfolios. Therefore, investors must try their best to diversify their investments into distinctive asset classes.
- Benefit from compound interest: In many ways, time is among the biggest asset for an investor. Hence, they should use it in a smart manner for financial gains. It is not enough to simply invest, earn returns and then spend the money. To build wealth, investors should focus on reinvesting the interest yielded instead. This would help them to generate a larger amount of money and create a well-rounded financial portfolio over time.
Kavan Choksi also points out that smart and successful investing does not always imply to availing the highest possible returns in the shortest period of time. In fact, steady and low-risk investments that are done over a long period of time are the ones to usually grow the best.