Just like in any financial year, most of you would be nurturing big-money goals for fiscal 2025 as well. Wealth advisors, meanwhile, often point out that your short-term goals should align with the long-term ones.
As a result, you should stay true to wealth creation instead of getting carried away with the flow. Here, we list out some of the key money lessons that each investor should be mindful of. In fiscal 2025, you may want to follow these money lessons to achieve your financial goals in the long term.
Doyens of investing such as Warren Buffett, Benjamin Graham, Charlie Munger, Morgan Housel and Ray Dalio recommended these lessons in different fora and platforms.
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Money lessons you should follow for long-term wealth creation
1. Stay away from Mr Market: The price quoted by Mr Market has no relevance if you don’t intend to sell your securities. It’s pointless to see the price every day unless you intend to buy or sell a stock that day. Mr Market is an allegory coined by legendary investor and author of ‘The Intelligent Investor’ Benjamin Graham to describe irrational or contradictory traits of the stock market.
2. Stay true to long-term goals: The long-term goals could be to buy a house, or children’s education, or save for retirement. These goals are non-negotiable. Do not compromise on these goals regardless of the temptation to spend or invest for a short-term goal.
3. Wealth generation is the key: Earning dividends from shares is a bonus of sorts. And little stock appreciation is exciting. But the key objective of investing is, or should be, to generate wealth which can happen primarily via equity investment.
4. Investing is not for the faint-hearted: Markets are meant to be volatile. So, when the market surges or crashes, you should not redeem. Be strong and don’t lose heart.
5. Continue your SIPs during market decline: Instead of buying more during a bear phase, investors tend to stop their SIPs believing that the market is not right for investing. Whereas the phenomenon of ‘rupee cost averaging’ says that investors should invest across different price points to get a fair average price and to maximise the chance of earning a higher profit.
6. Importance of portfolio: The ideal ratio between equity and debt is 70-30 in ideal circumstances. So, you should invest 70 percent of your portfolio in equity while the rest in fixed-income instruments such as fixed deposits (FDs) and bonds. But when equity prices rise, it is vital to redeem some of the equity assets to redeploy some of the funds in debt so that the debt-equity ratio remains the same.
7. Everything is just an event for investors: In February 2022, Russia invaded Ukraine, leaving markets jittery around the world. Oil prices jumped in its aftermath. Before that in January Jan 2021, rioters entered the US Capitol in what was referred to as the United States Capitol attack. Then Israel attacked Hamas in Gaza in October 2023. This and many more domestic and international events did impact financial markets significantly. And currently, Lok Sabha polls are believed to leave their footprint on stock markets.
Each time something significant happens, observers call the event a ‘watershed’ or pathbreaking, but in the long term, each event is part and parcel of the ongoing market cycle. The key is to remain invested in wealth creation and cut the noise.
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