Two resolutions that could make you rich
This is the time of year for making New Year's resolutions. And if you want to make your portfolio bigger, fatter and wider a year from now, then these resolutions are for you. Read on to uncover the two New Year resolutions that could make you rich…
The beginning of a New Year provides inspiration to make some resolutions for the year ahead, Alexander Green in Investment U
If you want to improve your portfolios performance, here are two resolutions to add to your list.
Resolution #1: Save more
All investment begins with saving. And unlike the performance of the stock market, saving is something that's under your control.
It will also have a significant impact on the long-term value of your portfolio.
For example, let's say you've accumulated a portfolio worth R100,000. If it compounds
at 11% a year - it will be worth R1,358,000 in 25 years.
Not bad. But if you add R500 a month along the way, it would grow to more than R2.1 million.
In The Millionaire Next Door
Thomas T Stanley and William D Danko reported that affluent individuals tend to follow a lifestyle conducive to accumulating money. The seven common denominators among those who build wealth successfully are:
Resolution #2: Pay less
They live well below their means.
They allocate their time, energy and money efficiently, in ways conducive to building wealth.
They believe that financial independence is more important than displaying high social status.
Their parents did not provide economic outpatient care.
Their adult children are economically self-sufficient.
They are proficient in targeting market opportunities.
They chose the right occupation.
When it comes to investing, expenses matter. A lot. Investment costs often get out of hand when markets are soaring and your portfolio is rising.
But even then high trading costs, front- and back-end loads, high management fees and other investment costs can eat away at your portfolio like termites in an antebellum mansion.
Know what you're paying. Make sure it's competitive. And if you don't know what you're paying, ask.
As a rule, more than 90% of retail clients don't know their total investment costs because a) they're not transparent and b) they feel awkward asking. Ask anyway.
So there you have it, two New Year resolutions to follow that could make you rich.