Rule number 1 – If you look after the money, the money will look after you!
The question then is how do you make the money look after you?
Understand your own definition of wealth.
A great example of this is a reporter that went to a hedge fund manager’s cocktail party when one of his guests mentioned to him that the hedge fund manager earns more money per month than what the reporter would earn in his entire life. To which the reporter responded, yes that might be true but he has something that the hedge fund manager will never have. The guest asked what this was and the reporter responded that he has enough money.
When you start your wealth creation journey be it at age 15 or when you start your career make sure you have achievable understanding of what creating wealth means to you and then align that with your financial goals. It might be tempting to give into ones short term desires such as that new car or overseas holiday, but by making the correct wealth creation decisions not only can you take advantage of market growth but also secure your future dreams and desires.
Start early and remember that you can make R1 into R2 and R1000 into R20 000 and so on but you can do absolutely nothing with R0 if you don’t invest. Investing R500 a month feels like it makes no difference. The reason for this is that it takes TIME to create wealth and your capital needs to earn interest on interest- i.e. Compound Interest. Below is a 76 year time line of Warren Buffets wealth creation when he started investing at the age of 14. You will note that the majority of his wealth was created in the last 30 years.
Yes you are investing R500 every month for the first 20 years, but see it as “you looking after your money”, by the time you get to retirement of financial freedom the money will look after you!
Setting Goals
Do you want to get rich or do you want to stay rich? Getting rich implies that you will have to take risks like starting a business or investing in risky assets, in other words you are willing to risk losing some capital. Set clear goals like being financially free at age 55 or 60.
In a world where an income and even better a double income seems to be a luxury, investing a portion of your salary every month is a smart decision ensuring you stay rich and you are doing this in a prudent way.
Wealth is created over a long period of prudent investing and sticking to your strategy. Your wealth can be a combination of a debt-free property, retirement funds, share portfolio, property portfolio, your business and/or any another type of investment portfolio. For the purpose of this discussion we will focus on a discretionary investment portfolio. A discretionary investment portfolio can be any or all of the following investment vehicles: unit trusts, endowments, tax-free investment accounts and a share portfolio in which you hold shares directly even creating wealth offshore in foreign currency. In our view there are two things you can do with money: you can either invest it or spend it.
Understand risk
Understanding your risk which is another word for TIME is a key ingredient in wealth creation! At Finsmart Asset Management we believe that a long term market view is crucial for successful investing. Long term Investments are statistically proven to provide superior returns with less volatility ensuring that your risks are handsomely compensated. Risk are the things we can’t see, we can worry about the next president and the impact of their policies but it really means nothing as no one could have predicted the Covid pandemic and the financial shocks that came with it. The question we need answer here is will you be able to tolerate the financial vulnerability when an unforeseen risk is triggered?
The upside of risk should also be considered, out of every disaster comes great opportunity just look at the explosion in online commerce.
Investor behaviour
Where do you find money so you can start investing? The only real way to do this is to follow a budget and limit your spending. It is interesting that you can invest as part of your spending but not the other way around. So every month when you do your budget try to find ways to save money on your spending and when you find a saving make sure you invest that saving. If you don’t measure you can’t manage. The only way to measure your spending is with a budget.
Personalised Wealth Plan
- As a fully independent financial services provider Finsmart Asset Management can tailor an investment solution to your exact needs whilst minimising cost and administrative processes.
- Due diligence and holistic financial planning will ensure that the plan meets your exact needs, be it opportunistic growth, tax efficiency or retaining wealth for future generations.
- Due to the complexity of a personalised wealth plan it is recommended to contact us directly so that a more detailed approach is taken to ensure that your goals are met.
- One needs to be ready to tackle life's twists and turns, a complete and well- structured Financial Plan is an indispensable part of taking on all of life's challenges.
- Our Holistic Financial Planning approach ensures that personal risk is minimized in order to protect your accumulated wealth. This is done through a complete analysis to better pinpoint and address risk at a specific and future point in your life.
- If you feel that you have unaddressed risks and are not sure how to eliminate them, give us a call for a personalized risk report.
With the sheer amount of markets, instruments and platforms available investing can be a daunting prospect. At Finsmart we demystify the Investing world, providing the correct investment mix to help you reach your financial goals.
Various wealth solutions are available to clients to cater for various life stages and individual preferences.