As investors and individuals, our primary goal is to build enduring wealth—a resource that not only sustains us throughout our lives but also provides a secure inheritance for future generations.

Today, the importance of saving and investing is widely acknowledged, evident in the increasing number of investors each year. However, merely investing (in anything and everything) is not enough to secure lasting wealth. It’s equally crucial to understand how to safeguard that wealth. While purchasing an insurance policy is a common method for protection, not all policies offer comprehensive coverage.

As discerning investors, we recognize the significance of adopting products, behaviors, and habits that foster wealth creation while mitigating potential risks. In this blog, we’ll explore several strategies—both constructive and detrimental—that shape our financial journey.

Wealth Builders

Multi-Asset Investing

Multi Asset investing is a great way to build wealth. It ensures that you participate across asset classes and capture the right opportunities at the right time. It enables you to save consistently and compound money over long periods of time. The best part? You manage risk effectively without compromising on returns.
Systematic Investment Plan
Jim Rohn once said that discipline is the bridge between goals and accomplishment. Many of us have struggled to cross that bridge. Who hasn’t had a tough time sticking to a routine, a diet, or an exercise schedule? There are three smart tools that successful people use to maintain discipline. They remove the distractions, reduce friction, and simplify decisions.

It is no surprise that being disciplined with money is challenging. Systematic Investment Plans are the best solution. A SIP allows you to pre-commit to an investment idea for the long run. So there are no distractions of where to invest, how much to invest, or when to invest. There’s no risk of you chasing performance or waiting on the sidelines. Your investments happen like clockwork without you getting in to transfer money. The process is smooth and frictionless. SIPs are the closest to a do-it-and-forget-it approach to investing.

Portfolio Rebalancing & Review

While SIPs can run on their own for a while, every portfolio requires review and restructuring. Those who skip reviews, miss out on new opportunities and stick to outdated ideas. Those who skip rebalancing may carry too much risk and will fail to protect profits.

Saving 30% to 50% of Income

In Charlie Munger’s words, the secret to becoming rich is a “no-brainer”. “Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. ”
Why should you save at least 30%? The math is simple: you work roughly 1/3 of your adult life and you need to save for 1/3 of your adult life (retirement). And in between you’ll have other financial commitments and aspirations. Delaying some expenses by a few years could leave you rich for life.

Wealth Destroyers

Poor Contingency Planning

If we look at India, most households end up in a financial crisis because of a medical emergency. The consequences of one hospitalisation can have young adults drop out of their education programs, be the inheritors of family debt, be pushed into undesirable careers, or defer their aspirations.

Contingency planning softens the blow. Life can surprise us in good ways and bad ones. Preparing for a rainy day ensures that we at least have an umbrella through the storm.

Mixing Insurance & Investments

Insurance is about risk management and investments are about managing returns. When we combine the two, we don’t end up with the best of both worlds. Often, you end up with either too little insurance or it’s enough and costly. When insurance is costly, investments take a hit. And when insurance is too little, you end up with poor contingency planning. Pick your poison.

Trend Chasing

“Great things are not accomplished by those who yield to trends and fads and popular opinion. ” – Jack Kerouack

Chasing trends results in poorer performance. [Bandhan slide]. And if you think 1.4% compounded over 25 years makes little difference, think again. Someone who saves 10 Lakhs a year for 25 years and chases trends stands to lose 1.5 Crores when compared with someone who doesn’t.

No Big Picture Vision

The biggest wealth destroyer is the lack of clarity. If we don’t know why we’re saving money, we will lose motivation and discipline. The big-picture vision comes from planning. Planning allows us to organise our priorities and bring different elements of financial decision-making together.

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