There is something about the lifestyle of rich and wealthy investors, which makes us wonder, what their secret is. You must know that what goes in their investment planning is intriguing.
Everyone who invests their money is out here to become wealthy. However, not every investor becomes wealthy. The secrets of wealthy investors are closely guarded. It takes time, patience, and a bit of luck to become a wealthy investor.
Three steps to become a wealthy investor
Investors have their own strategy to become rich or wealthy. How you can turn the tide in your favor is what it takes to be a wealthy investor. Here are the three steps that can reveal how to become a wealthy investor.
Save for emergencies
When you are starting your journey as an investor, the first step involves making sure you have at least one year of savings for a rainy day or emergency funds, which can amount to approximately $50,000 to $70,000. Once you are secure on your back-up on emergency funds, you can move ahead with your investments without the fear of losing money.
The amount saved for an emergency fund can be invested in any secured funds or fixed income deposit, which will give you the liquidity when you need the most. Having a steady cash flow is very important.
Decide on the investment amount
The second step involves how much amount of money you will be investing on a yearly basis. Charting a strategic goal for a year can be helpful in deciding how much of finance you will actually need. You will need $50,000, for instance. That $50,000 will give you the returns of 6%, and thereafter money starts rolling. Considering inflation and taxes, you will still be left with a substantial amount at your disposal. The more you invest the better you become at investing. Investing in 401 (k) and IRA can help to save on tax so that taxes do not bog down your investment income.
Having said that, even if you incur a loss, in any of your investment at this stage, you are still prepared to deal with it, as you have enough safety net to tackle any situation.
Know the power of compounding
The first step was keeping aside some amount for a rainy day, the second step is deciding on your yearly investment amount, and the third step is to work towards your wealth. Now that your finances are in place, you should look forward to locking your capital gains on the investments. Work on your taxes and inflations. Now, it is the time to make money work for you. By keeping risks at bay, you need to focus on growth. The power of compounding will come to your rescue. When you have figured out your income after deducting taxes, you can see the numbers for yourself.
These three steps to becoming a self-wealthy investor can work big time if you are focused and disciplined enough to not get distracted. Even if you face losses, keep in mind that after the bear market comes the bull market. Hence, do not lose hope.
