Last Updated on Dec 18, 2019 by James W

Investing money and growing it to be rich in few years is far easier for salaried investors than they realise. However, often the current needs and few wrong financial decisions can jeopardise this dream for them. Therefore, as a salaried investor, you need better planning and commitment, if you wish to navigate the investment maze and achieve your wealth goals.

Here are six investment principles you can follow to grow wealth and become rich:

  1. Invest with A Goal

Before you start investing the money, there must be clear goals you should aim to achieve. These goals help you keep your priorities clear whenever an urgent need to spend arises. For example, imagine going shopping with the family in a mall, and your kids find something they want you to buy immediately.

As parents, we often end up buying these things, even if they exceed your budget a little. However, if you have set the budget knowing that rest of the money is going somewhere more important, you will probably not exceed the budget. Therefore, set your goals scientifically, before you start investing.

  1. Pay Yourself

For salaried with family, the greatest challenge is to strike a balance between the demands of the family members and saving for their future. The best way to overcome this challenge is to assign a part of your income for the monthly household budget. This exercise of rewarding the family out of your income will always leave the remaining amount free to be saved and invested.

  1. Invest as Early as Possible

A tree doesn’t grow into its full potential in one day. Nor does investment. Investment takes time; the earlier you start investing, the longer your money stays in the market.

Suppose you plan to retire by the age of 55, and you have fixed a wealth target of Rs 2 Crores. If you start working on this plan at the age of 25 you may save as little as Rs 8,800 per month (assuming a rate of return of 10% p.a.).

However, if you start at the age of 35, you will need to save about Rs 26,000 per month to achieve the goal. Therefore, the old Chinese saying, “best time to sow the seed was 20 years ago, second best time is now.”

  1. Diversify to Keep Your Portfolio Flexible

If all investment instruments can be put on a single scale, the scale will start with “Minimum Risk & Minimum Return” and continue towards “Maximum Risk & Maximum Return”.

As a salaried investor, you need to ensure a balance between your family’s short-term needs and the long-term investments (where you can earn higher returns). Therefore, it makes sense to use multiple investments which lie at different places on the risk-return scale.

For example, retirement savings can be given slightly higher equity exposure, while you keep about 3 to 6 months of your income in very liquid, readily available deposits.

There are few investments which allow you to do everything in one place. One of these plans is Unit Linked Investment Plan (ULIP). ULIPs are offered by the life insurers in India and are one of the most tax efficient investments available.

ULIPs also have features to help you maintain a well-diversified portfolio, which can include stocks, bonds and even ultra-short-term investments which are very safe and highly liquid.

The best ULIP plan in market offers the investors opportunity to switch between the assets, which is the second most significant feature of a good investment portfolio.

The best part is switching between funds within a ULIP plan doesn’t create a tax liability or additional expense for the investor. You can simply submit a mandate online or through a branch to switch between funds and change your portfolio.

As time changes, priorities take a different turn as well. A 20-year-old guy and a man who is in his 40’s is not the same; they have different priorities in their lives. The financial priorities and goals change with age, and so make investments. You must shift your investment plans from equity-oriented fund to debt-oriented fund.

This flexibility in ULIPs allows you to easily twist your investments to suit your current situation. For example, when you are nearing a goal, you can increase your investment into fixed income funds and ensure you have enough money to meet the goal.

  1. Consistency in Investment

It’s a human tendency to start something very passionately and then turning off the lights rather abruptly. The same applies to investing. You may start your investment process with the much-needed zest, but discontinue the same after a year or two, which is not the ideal scenario to grow wealth. This habit can lead you towards losing your money. So, imbibe investment discipline in yourself and keep up your patience if you want to grow your wealth.

  1. Consult an Expert

When it comes to investing money, thinking twice before taking the final decision is vital. In case you are unsure about your own financial priorities and goals, consider getting professional help. Consult someone knowledgeable, who is close to you and tell him about your plans or simply let a financial advisor help you with some good investment ideas that would suit your appetite as well as needs.

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