The importance of wealth creation can be summed up by a statement made by legendary investor Warren Buffet – “If you can’t find a way to make money while you sleep, you’ll have to work until you die” .

The quote explains that a person who survives on a salary with no money left over between paydays will unfortunately work until the day they die or rely on help from others when they can no longer work. It’s about saving, investing, and creating an income stream that pays off whether you’re working or not.

Mutual funds as an investment option for wealth building can work because of compounding potential, easy liquidity, transparency of operations, diversification of assets, thereby reducing risk, are professionally managed and require a low investment to start.

The following benefits and attributes of mutual funds highlight how much they greatly facilitate the process of building wealth:

Tying investments to your future goals like holiday trips abroad, buying a new car, raising children, child marriage, retirement funds and investing accordingly is convenient as it gives a goal to the investment and avoids us to use the investments intended for objectives important for our future for other short-term problems. In addition, it tells us when to invest and when to withdraw, thus facilitating decision-making. Emotional biases tend to play a big role when investing because we all wait for the market to go down to start investing or we avoid investing and wait for the market to recover. But ideally, investors can invest when the market is down. Investing through SIP can also help avoid this bias and discipline by investing regularly.

  • Spending time more than timing investment

Staying invested longer gives investors a better experience and a fruitful outcome rather than timing the market as it is difficult to correctly predict market performance and returns. Instead, staying invested over a full investment cycle might yield better results.

  • Increase your investments according to the increase in your income

If you are a salaried person, you will get an annual raise. If you increase your monthly investments by the same amount as your annual increase each year, you may be able to save a lot more. Likewise, for a businessman, an increase in investment should be made with increasing profits.

Wealth creation is an ongoing process. You need to make a plan and stick to it in order to achieve all of your goals. Additionally, there is no one-size-fits-all solution to wealth creation, as each individual has goals, risk tolerance, and so on. unique. So choosing the right investment that can help you achieve your goals plays a key role in ensuring you succeed in building wealth over time. Investors should consult their financial advisor for a better understanding of this process.

Views are personal: The Author – Pradyuman Kumar Jain of Namokar Investments is a Mutual Fund Distributor from Jaipur.

The opinions expressed are those of the author and are personal. TAMPL may or may not subscribe to the same. The opinions expressed in this article/video in no way attempt to predict or time the markets. The opinions expressed are for informational purposes only and do not constitute investment, legal or tax advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of any such action taken by you. There is no guaranteed or assured return in any of the Tata Mutual Fund schemes.

Investments in mutual funds are subject to market risk, read all plan documents carefully.