Successful investors have made their wealth by taking advantage of various investment styles and strategies, which have helped them enjoy strong returns over the long-term. While these strategies may be vastly different, these investors all have a few things in common, contributing enormously to their success.
Fortunately, even a beginner or average investor can benefit from these same techniques, allowing pretty much anyone to start building their wealth by investing according to financial advice from verified experts. Here are five tips for becoming a successful investor:
1. Invest as Early as Possible
Time is one of the most critical assets an investor has to earn as much money as possible solely due to the power of compound interest. Even with the Global Financial Crisis, the Australian share market yielded an average total of 9.5% per annum over 30 years until June 2019. That means one $10,000 investment in the share market would have ballooned to $152,000 at the end of the 30 years if it earned the market return. If it sustains this level of return for 50 years, that initial investment would be worth almost $935,000, which is why it’s best to start investing as soon as possible.
2. Invest Frequently
Investing frequently in the share market has many benefits. Dollar-cost averaging, which can decrease the impact of volatility on your shares, is one of them. Volatility should work to your advantage since you’ll be buying more shares when the price is low and fewer when the price shoots up. Additionally, regularly investing allows you to benefit from compound interest. If you invest $10,000 each year over 30 years instead of just one $10,000 investment, you’ll have a whopping $1.65 million at the end of the investment period.
3. Buy From High-Quality Companies
Another habit that successful investors have is to buy from high-quality companies instead of giving in to the hyped-up shares or backyard barbecue gossip that typically doesn’t deliver. Although there are many success stories, even more companies fall short of delivering their potential and have to resort to fighting tooth and nail to stay afloat. To avoid this, buy from quality companies with solid business models, solid growth prospects, and sustainable competitive strengths that will likely earn stable returns over a long time.
4. Hold Onto Your Shares for the Long-Term
It can be easy to be spooked by short-term volatility, but it is actually just a part of the process. Instead, buy shares from strong companies with a long-term view and hold on to them, which is one of the most effective ways of building your wealth. If you’re patient and discerning enough, you will hopefully be rewarded. However, it’s important to note that although some shares may make pull-backs over the years, selling out in any of these instances means that you could also sacrifice massive future gains.
5. Reinvest Dividends
Lastly, consider reinvesting your dividends. If you aren’t investing for income, reinvesting your dividends is an excellent way to accumulate more wealth over the long-term. You will hopefully enjoy greater returns, more security, and hefty reserves you can depend on during retirement.
Investing can be intimidating at first, but when you stick it out in the long run, you’ll enjoy massive returns that you wouldn’t have been able to get elsewhere. With these tips and the help of an investment adviser, you’ll soon become a veteran investor with plenty of returns.
Coastal Advice Group is a team of financial advisers serving all stages of life, from young professionals to retirement to aged care. We educate our clients, help them evaluate their spending habits, create clearly defined goals, and develop a strategy that supports all their needs and objectives. Contact us today to schedule a consultation!
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Coastal Advice Port Macquarie, and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429