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What are the most common habits of successful investors?
It’s a common saying that if you want to get rich, you need to put your money to work. Most successful investors have a set of investment habits that they follow consistently to become wealthy. However, what are these habits of successful investors that you can employ to generate wealth? Let’s find out!
Common habits of successful investors
- Start with a plan: It all begins with the right plan. You need to determine the amount that you can invest each month, the goal of your investment and the amount that you wish to achieve. This sets the direction for your investment and also helps you determine the amount that you actually wish to invest.
- Be a saver, not a spender: You need to prioritise saving instead of spending. Most people spend first and save whatever is left when, in fact, they need to do the exact opposite. You should save first and then spend whatever is left. You can follow the 50:30:20 rule. You should spend 50% of your income on meeting your necessities, 30% on your desires and 20% on your savings and investments. You can change this ratio based on your income and investment goal.
- Invest regularly: Consistency is the key! You need to invest regularly to keep growing your investment portfolio and generate wealth. Regular and long-term investing will also kick in the benefits of compounding. You can automate your investments by starting a Systematic Investment Plan (SIP). This allows you to invest a predetermined amount each month in mutual funds.
- Set aside money for emergency fund: An emergency fund is a fund you build to deal with emergency situations like job loss, sudden medical expenses etc. Ideally, you need to maintain an emergency fund covering at least 3 to 6 months of your living expenses. This ensures that in case any emergency arises, you don’t need to liquidate your investments and hamper your growth.
- Diversify: You must have heard, don’t keep all your eggs in one basket. You need to diversify your investments into multiple asset classes. This helps you reduce your overall portfolio risk. You can diversify by either investing in multiple asset classes (like mutual funds, equity, fixed deposits, gold, and real estate) or also diversify by investing in different categories of investments in a single asset class (like small-cap funds, large-cap funds, index funds, etc.)
- Control emotions irrespective of market movements: The markets can sometimes be very volatile, and you might witness ups and downs in a relatively shorter period. Many investors panic, especially when markets take a dip, and end up making the wrong investment decision. During this time, you should assess the reason behind the fall, the investments you have made, and how the fall impacts your investments. Controlling emotions, irrespective of market movements, is key to successful investing.
- Invest with a long-term view: If you invest in the short term, you can generate income. However, if you want to create real wealth, you should invest with a long-term horizon. This unlocks the benefits of compounding that can help you create generational wealth.
- Don’t forget about taxes: Gains through investment are not exempt from taxes in India. Therefore, any investment planning should carefully consider the taxation implications as they directly impact your returns. If you plan your taxes well, then you can make the most out of your investments.
Also Read: ETF vs Mutual Funds: Difference between ETFs and Mutual Funds
In a nutshell
Investing is important if you wish to create generational wealth. Above are some of the common habits that you will find in most successful investors. By cultivating the above habits, you can take the first step towards becoming a successful investor. What follows is choosing the right investment avenues.
Axis Bank offers multiple investment options to the investors. You can begin investing in mutual funds of your choice, depending on your goals and investment objectives. Take the first step now towards becoming wealthy with Axis Bank!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.
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