Here’s how you can become a successful investor!

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Attaining financial goals is a proud moment. It is an outcome of ones disciplined, systematic and goal-oriented approach. Achieving what you desired in a stipulated time period through suitable financial planning makes an investor successful. It is not an easy task as it demands quite a lot from investors – be it patience, strong belief, vision or a conviction for a better future.

The aspect everyone needs to be mindful of is that investment is not a magic tool which will fructify soon and show results. In fact, investment is process-driven activity which needs planning and adherence to certain basics involving behavioral finance which is nothing but psychology revolving around money. Most often, what investors are looking for is a get rich quick scheme. Such a scheme does not exist and moreover, a casual approach to investing without any specific goals or timelines is a recipe for personal finance disaster. Having said that, creating wealth and becoming successful investors is a simple process which needs time, consistency, perseverance and absolutely no sophistication.

Listed below are a few steps which can help everyone achieve their financial goals successfully:

a) Analyze Your Risk Tolerance Level  First and foremost, as an investor one should know his/her risk taking capabilities. Factors like your current assets and liabilities, upcoming responsibilities, life’s events and your age can help in figuring out the risk appetite. A lack of correlation between your risk appetite and choice of investment assets could prove to be detrimental.

b) Set Realistic Financial Objectives Being realistic while setting financial objectives is important. Surrealism has no place in investment. Thus, it is vital to set financial goals which are achievable in a stipulated time.

c) Diversify  Diversification is an essential key for a successful investment experience. Diversification ensures that your assets are not concentrated in one particular asset class. Since no asset class is risk free, asset concentration could pose a big risk. It should be noted that every asset class — be it equity, debt, gold or real estate — has its distinct market cycles, different risk factors and risk to reward ratios. Thus, to get optimum returns it is financially prudent to diversify your investment across multiple asset classes such that the portfolio delivers optimal risk-adjusted returns.

d) Provision for Emergencies Often, investments are discontinued or dipped into because of intermittent emergencies like medical events, job loss, unplanned travels, among others. This not only breaks your discipline and systematic approach but also puts a stop on the long-term compounding effect of investments. In order to ensure your investments continue unabated without any breaks, it is very important for every investor to make provisions to meet unplanned expenses. For this purpose, create an emergency fund which has at least six times your monthly expenses kept away from other investments.

e) Invest Regularly Consistency is vital for successful investment experience. One should invest regularly, irrespective of the market or economic conditions. Instead of trying to time the market, an investor’s focus should be on the time an investment has spent in the market. The longer you stay invested, better is the potential rewards.

f) Stay Disciplined and keep a long-term approach As mentioned earlier, being a successful investor does not require exceptional intelligence or expertise. It simply needs discipline and an approach full of patience coupled with a long-term investment orientation. Small but consistent steps done well over decades can do wonders. A myopic approach to investments holds the potential to derail the wealth creation journey. Even a tree does not start bearing fruits the day it is planted. It takes time and in the meanwhile one has to nurture the tree. Similarly, investment is a long-term process which needs time to bear fruits. In this journey, investors need to have the conviction that a disciplined investment with a long-term approach will help grow wealth.

To conclude, patience, discipline and systematic approach to investing are among the non-negotiable traits of a successful investor. Keep faith in your investment and be goal-oriented in nature. This will help an investor power through the various ups and downs over the investment tenure in a smooth manner, all which will finally lead to a happy investment experience.

(The author is Managing Partner at RAFCO Wealth)