Like any other fiscal year, most of you will be setting big goals for fiscal year 2025. Wealth advisors, on the other hand, often point out that short-term goals should align with long-term goals.
Therefore, you need to stay true to wealth creation instead of going with the flow. Here are some key money lessons that each investor should keep in mind. In 2025, follow these money lessons to help you achieve your long-term financial goals.
Investors such as Warren Buffett, Benjamin Graham, Charlie Munger, Morgan Housel, and Ray Dalio have recommended these lessons on various forums and platforms.
Also Read | How can investors stay alert and safe amidst the spate of deepfake videos from NSE and BSE chiefs?
Money lessons to follow for long-term wealth building
1. Please stay away from Mr. Market: If you do not intend to sell the security, the price offered by Mr. Market is irrelevant. There is no point in looking at prices every day unless you intend to buy or sell stocks on that day. Mr. Market is an allegory coined by the legendary investor and author of “The Smart Investor.” benjamin graham To explain the irrational or contradictory characteristics of the stock market.
2. Stay true to your long-term goals: Your long-term goals might be to buy a home, educate your children, or save for retirement. These goals are non-negotiable. Even if you’re tempted to spend or invest for short-term goals, don’t compromise on these goals.
3. Wealth creation is key: Getting dividends from stocks is a kind of bonus. And even a small rise in stock prices is exciting. But the main purpose of investing is, or should be, to create wealth, primarily through stock investments.
Four. Investing is not for the faint of heart: The market fluctuates. Therefore, you should not redeem if the market spikes or crashes. Be strong and don’t lose your mind.
Five. Continue SIP even if the market declines: Instead of buying more during bearish phases, investors tend to suspend SIPs as they believe that the market is not suitable for investment. The phenomenon of “rupee cost averaging” indicates that investors should invest across different price ranges to obtain a fair average price and maximize their chances of earning higher profits.
6. Importance of portfolio: In an ideal situation, the ideal ratio of equity to debt is 70:30. Therefore, he should invest 70% of his portfolio in stocks and the rest in fixed income instruments like fixed deposits (FDs) and bonds. However, if the stock price rises, it is important to redeem some of the equity assets and reallocate some of the funds to debt in order to maintain the debt-to-equity ratio.
7. Everything is just an event for investors: Russia invaded Ukraine in February 2022, destabilizing markets around the world. In the aftermath, oil prices skyrocketed. Before that, in January 2021, a mob broke into the U.S. Capitol building in the so-called storming of the U.S. Capitol. Then, in October 2023, Israel attacked Hamas in Gaza. This and many other domestic and international events had a major impact on financial markets. And now, the Capitol polls are expected to leave a mark on the stock market.
Whenever something significant happens, observers refer to it as a “watershed” or path-breaking event, but over the long term, each event is part of an ongoing market cycle. The key is to continue investing in wealth creation and cut out the noise.
Also read | Financial planning pitfalls: 10 mistakes that can derail your dreams
8. Please buy correctly and sit tight: We recommend that you perform due diligence before deciding to invest in stocks or funds. After researching a stock, if your analysis suggests this is a good investment for you, buy it and then sit back. After buying the “right” stocks, don’t worry about small provocations
9. Do not insert a round peg into a square hole. There is no one-size-fits-all approach to investing. What works for young investors may not work for middle-aged investors who are supposed to be a little more risk-averse. Additionally, what may work for a middle-aged investor may not work for someone nearing retirement. Therefore, the dynamics of the equity-to-debt ratio and risk-return analysis change based on the individual investor’s risk appetite and the investor’s age.
Ten. Consult with experts and advisors: However, some basic principles of investing can be learned and implemented by investors themselves. However, if things get a little more complicated and involve greater risk, it’s always a good idea to hire a professional. There is no fear in consulting an investment professional or wealth advisor.
Also Read | Lok Sabha Elections 2024: How will it impact financial markets and what should investors do?
11. Each asset class has its own value proposition: Investors tend to view one asset class as a whole, each with its own strengths and weaknesses. For example, no matter how good investing in stocks is for long-term wealth creation, it cannot replace debt, bonds, or precious metals. And vice versa is also true. Therefore, it is best to look at the various asset classes collectively rather than looking at them individually.
12. investment and gambling: Remember that investing in some categories such as derivatives and cryptocurrencies is so risky that it is not much different from gambling. That’s very different from long-term investing, which is based on a stock’s potential.
13. diversify: It’s good to diversify across asset classes, sectors, and market caps. Diversification should occur at all levels. In addition to diversifying across asset classes, you should also diversify across sectors and market capitalizations: large-cap, mid-cap, and small-cap stocks.
14. acceptance of Losses are the key to good investing: In the words of psychologist Daniel Kahneman, the pain of losing a rupee is often more painful than the job of earning a rupee. This leads to many wrong decisions by investors. For example, if you lose money due to a bad investment decision, you might want to stick with it and correct your mistake instead of leaving the stock and losing less money.
Also Read | From Screen Phobia to Financial Knowledge: 3 Hidden Lessons About Money Extracted from The First Omen
15. Investment knowledge and mental strength: Knowledge about investing and money is important, but mental strength, perseverance, perseverance, and other “soft skills” are even more important. These characteristics play an important role in investors’ investment activities.
16. efficient market hypothesis: Efficient markets only exist in textbooks. warren buffett pointed out once. Stocks usually trade at ridiculous prices, both high and low. The reality is that marketable stocks and bonds are insecure. Therefore, it is a mistake to believe that markets will correct themselves to reflect their true value, as suggested by the efficient market hypothesis.
17. Good stocks are hard to come by: Warren Buffett once talked about the uniqueness of blue-chip companies, emphasizing that Berkshire Hathaway was only able to select 12 blue-chip companies in its 60 years of business operations. That is, on average he only once in five years.
18. Misleading short-term returns: Quarterly returns from media headlines can be very misleading and misinform investors. Some stocks may look in tatters based on the day’s news, but may still enjoy a financial moat (e.g., great cash flow or patents) that makes them attractive from a long-term investment perspective. If you look at it, it could be a good “investable” business.
Also Read | Netflix’s Baby Reindeer: Revealing the Hidden Money Lessons Every Viewer Needs
19. power of compound interest: It cannot be overemphasized that compound interest is the key to long-term wealth building. Warren Buffett’s letter notes that Berkshire’s progress has grown rapidly since 1967. They point to four key reasons for Berkshire Hathaway’s astronomical rise: continued savings by investors, the power of compound interest, avoidance of big mistakes, and U.S. tailwinds.
20. Leverage is risky: Charlie Munger once pointed out that leverage is dangerous because there is no such thing as 100% certainty in investing. This means that even after earning high returns, past gains can be wiped out if the investment goes down.
twenty one. Build an independent voice: According to Ray Dalio, it’s important to form your own opinions on different things when it comes to investing. You can’t keep yourself in good shape by just following the grape vine or what’s advertised.
twenty two. Invest in sectors you know: Dalio also believes that investing involves risk, regardless of which sector you choose. One of the easiest ways to reduce the risk of investing is to choose a sector that you are familiar with.
twenty three. prevent wrong decisions: Preventing bad decisions is just as important as making good decisions. Be humble and focus on protecting your capital. You need to be prepared for the unknown and plan accordingly. You need to be prepared not only for what is likely to happen, but also for what could happen.
Also Read | Staff: 3 important lessons about money from the cast of Tabu, Kareena and Kriti
twenty four. luck plays a role: Morgan Housel, author ofpsychology of money‘ believes that luck and risk are brothers. The reality is that all outcomes in life are guided by forces other than mere individual effort. He quoted New York University scholar Scott Galloway as saying, “Nothing is as good or as bad as it seems,” and that luck and risk are very similar, and that one should not treat the other with equal respect. He explains that he cannot believe it.
twenty five. Buy time with money: If you become rich in the true sense of the word, it will be convenient if you can use money to buy time and do the things you want to do. Some people may seem wealthy, but that’s only because they purchased assets with loans. In the truest sense of the word, they are not wealthy, Hausl writes in his book, The Psychology of Money. Because these assets represent liabilities. Real wealth is the accumulation of unspent income, not something that pays regular interest or is due back.
Unlock a world of benefits! From insightful newsletters to real-time inventory tracking, breaking news and personalized newsfeeds, it’s all here, just a click away. Log in here!
