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6 habits of successful investors that will take you a long way in wealth creation

  • One common thing among all successful investors is their seemingly simple habits of investing.
  • Some important habits of successful investing include consistency in investment, sticking to a financial plan and diversification.
  • Strong mindset of investing regularly with discipline is what made many investors billionaires.
Success does not come overnight. Similarly, achieving success in investing is also a long term process. From US-based Warren Buffett to India’s Rakesh Jhunjhunwala, nobody made money by investing for a single day. One common thing between all successful investors is their investing habits or say their ethics of investing they abide by.

Their strong mindset of investing regularly with discipline is what made them billionaires. The investing habits inculcated by these successful investors are very simple and something that you and I can pick up easily if we set our mind onto it.

Here are 6 common habits of successful investors for you to learn from:

Stick to your financial plan

Investing is just not about creating wealth in the long term, it is also about accomplishing those mid-term goals in the way. When starting to invest, make a financial plan and note down your goals. Be firm about your goals and no matter what, be consistent in your regular investment.

While setting a goal — for instance — buying a home, make an outline for the investment period, monthly savings to contribute to the financial plan, minimum return on investment and so on.

Do your own research

It would be fair to say you should know where you are investing your hard earned money. Thus, before investing in a product, make a rule to do some research. Like you would not buy a car without comparing it with its competing brand’s model, price, features, the same applies to investment. Research can involve many things, including learning about companies, sectors, market trends and so on.

Invest with a long-term view

Investors focused on the long term goals like gathering funds for retirement, children’s education tend to be more successful in achieving their target fund than those chasing short term returns. This is because successful investors know that money cannot be made in a single day and there is a difference between trading and investing. Investing is a long-term strategy and trading is short-term.

When you are invested for the long term, short term fluctuation in the market will not stress you as your goal is fixed. Instead, this strategy helps in compounding your investment effectively. Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

Don't leave all eggs in one basket

Diversification is the answer to not leaving all your eggs (money) in one basket (any one investment asset like stocks). The idea is to distribute your money across investment assets like stocks, debt instruments, fixed deposits, gold, mutual funds, real estate and so on.

Diversifying is important because it keeps your portfolio away from being too heavily weighted towards one company or sector. This helps in spreading the risk and ensuring your investments are sound and protected in the long run.

Be consistent with investment

When it comes to investing, regular investments are more beneficial than lump sum. In regular investment, one has to ensure to invest a particular amount every month no matter if the price of the asset is high or low. Some investment products like mutual funds have options like systematic investment plan (SIP) wherein they will deduct a fixed amount every month from the bank to invest in the fund. This process takes out emotions out of investing and avoids any delays in putting your money to work. Moreover, this will make you a disciplined investor.

Keep aside an emergency fund

By now, we all know the importance of having an emergency fund to rely on incase of sudden uncertainties like a pandemic.

Such a fund is made to help you meet your routine expenses during times of crisis like job loss, medical emergency etc. Depending on your income and expenses, an emergency fund can be three to six months of your monthly income. It is best to keep your emergency funds in assets that can liquidate your funds quickly like savings accounts, fixed deposits and liquid mutual funds.

Liquid funds are debt funds that invest in fixed-income securities such as certificates of deposit, treasury bills, commercial papers, and other debt securities that mature within 91 days. Liquid funds do not come with a lock-in period and their redemption in these funds are processed within 24 hours on business days.