Secrets to making money

If you are interested in making money, you need time on your hand. The longer you invest your money, the better your chances of making money. One of the most important things we keep hearing is the power of compounding, by compounding we mean, making money on the earnings which get invested. So to gain from the power of compounding, you need to have a longer time horizon. Historically, the stock market has always gone up, there would be short term volatility as it is now, but long term it would always go up, so go for equity. If you are not sure where to invest, go for a good equity mutual fund with a good track record. If you find that investing in stocks is risky, go for asset allocation. Asset allocation means spreading your money over different classes of assets.

Remember, when you spread your investments over different classes, your returns would come down, so do your asset allocation according to your goals and risk appetite. Liquidity should also be considered, when we do asset allocation or for that matter any investment. You should keep aside some amount which will be risk free and available at any point of time. As we said earlier, in stocks there could be short term volatility, so if you require money soon and the market is down, you could end up losing some of your investment amount as well. When you keep your investment in risk free investments, the returns would be lower as compared to stocks. The best way to invest in a stock market is through a SIP i.e. systematic investment plan, this helps in cost averaging. This is the main reason why most of the financial advisors advise you to go for SIP.

If you have been reading my posts regularly, I had mentioned about buying and holding a stock. By buying and holding, I had mentioned that in such cases, keep reviewing on a regular basis. Buying and holding, did not mean buying and forgetting. Market conditions keep changing and if the stock you had purchased has no value in the current market, you need to get rid of it or else you can forget your money as well. Follow the above rules and move ahead to making money and as you reach closer to your goal, move your money to risk free investments and enjoy yourself after that. All the best.