The key to building wealth is to follow a strategy and avoid making investment mistakes wherever you can. You may not think of yourself as rich, but putting your money to work for you is the secret to amassing the wealth and savings you’ve only dreamed about. If you can avoid these mistakes and misconceptions, you’ll be well on your way:
Not Saving Money
While investing is a surefire way to increase your wealth, it’s also vital to have a savings strategy that not only puts money aside for your investment accounts, but provides a cash flow cushion. If you consciously save a set amount each month, that means you’re on top of your expenditures and budget, and that’s a good place to be. Your goal is to avoid the stress of credit card debt while putting money away for investing at the same time.
Maintaining Social Media Status
With people constantly oversharing their latest luxury purchases and grand vacations on social media, it’s easy to want to keep up. If you develop the habit of buying certain brands, spending more than you can afford, and acting like you have more money than you actually do, it will wreak havoc on your budget and cripple your investment ability. Don’t compare your results to anyone except yourself.
Limiting Investment Choices
Lots of people think of stocks and bonds as the only realistic ways to invest their money, whether it’s through a 401k plan or a financial advisor. But high net worth individuals typically have a broad portfolio that includes more unique assets, like real estate, gold, and art. Now you can’t count on those items to be easily liquidated into cash, but they will add stability to your investments and increase in value over time. Investing in business ventures is another way to diversify, and by doing this, you can take advantage of the private market. You can also expand your investment options to emerging areas in Asia and South America, instead of sticking only with the United States and other developed countries. Of course, these opportunities require a great deal of research and most likely the help of a financial advisor, but they are another way to branch out and spread your risk/reward potential.
Changing the Plan
Before you make investment decisions, set your financial goals for the future and create the long-term plan that’s going to get you there. A qualified financial advisor can help you do this, and once it’s complete, stick with your plan through the ups and downs of the market. Don’t change your strategy all of a sudden because the market is going through a downturn. On the other hand, be sure to work with your advisor to make sure your portfolio stays balanced and you’re not over-invested in certain areas. There are many ways to do this, and it can even be automated.