It’s like embarking on a long highway journey in which there could well be many bumps and detours – maybe even the occasional flat tire or accident – along the way before arriving safely at one’s destination.
Investment goals can vary according to individual lifestyle preferences, estate plans and designated beneficiaries and charities. In addition, they can change as economic and market conditions change and/or as we change; for example, from needing current income to finance a growing family to focusing increasingly on the accumulation of latter-year savings for those ever-lengthening years in retirement.
If there is a single constant in a multi-changing and ever-challenging process it is the importance of building wealth according to a customized and well-constructed investment plan without having to risk precious (and hard-won) savings beyond affordable limits. It follows that successful investing must be a systematic long-term affair in which en passant volatility, distractions, and temptations are rigidly subordinated to a purposeful and disciplined building.
In setting up and managing portfolios to this end, two iron-clad rules must be set, the correct balancing and periodic re-balancing between fixed-income and equity securities, and diversifying the inevitable accompanying investment risks by not having too many eggs in hat one precious basket.
In turn, applying these rules to the equity section of portfolios with some MCX free tips must mean the judicious allocation between different sectors and industries – just as there must be an awareness of credit quality and risk within the debt and fixed-income section of portfolios. Balance and diversification are central pillars of superior long-term investing that can’t ever be emphasized enough.
In building individual portfolio wealth, remember as well that fixed income involves the lending of savings on pre-determined interest rate and loan repayment terms, while equities are the engines charged with growing savings – and therefore overall investment wealth – in superior risk-reward fashion: And that in well-chosen common stocks (and equity-related investment vehicles) are the true building blocks of desired long-term investment wealth.
In selecting top-quality, above-average, building-block stocks it must also be determined how the desired superior total return is going to be best divided between current dividend yield and future capital appreciation; in other words, between income now and growth later. This decision should ideally also include the awesome power of compounding through the reinvesting the rising dividends paid by successful companies in more of the same over time.
Many companies offer dividend reinvestment plans as a cost-free way of adding to investment stakes. If investment income isn’t needed for current living purposes, reinvest dividends in more shares of such companies and be astounded at the explosion of equity wealth that follows.