In the last blog, we highlighted good habits to accumulate wealth. That's all good and well, however we now need to figure out how to manage your wealth and continuously grow it.
But you may ask, what is the best way to grow wealth?
The truth is that there is no single best way. The best choice for you will depends on:
Your risk tolerance (how much risk are you willing to take?)
Your knowledge (how much you know about what you've invested in and other potential opportunities)
Your time horizon (how long you want to invest for?), and
How much time you want to spend on managing your money.
Here are 5 things to consider when managing your wealth:
1. Start early and save regularly
When growing your wealth, the biggest advantage you have is time. Time is one of your best friends as an investor. The longer you put your money away for, the longer your money has time to work for you and the greater the potential return. Regular contributions are good as they grow your base and give you more to work on. Over a long enough time frame the interest and dividends earned on your savings have the potential exceed your total contributions.
2. Take advantage of investments that provide some tax relief
Some investments in the market have been designed to provide some form of tax relief. The relief is in the form of not having to pay tax on the return or dividend earned on your investment.These investments include Tax free savings accounts and Section 12J investments.
3. Don't put all your eggs in one basket
Diversification is the single most effective way of reducing investment risk. In practical terms, diversification is all about investing in different type of assets to reduce your risk exposure. Whether it’s cash,shares, cattle, property, art, gold or antiques, every investment sector goes through good times and bad. Spreading your money across different assets reduces the impact of a potential bad cycle in any one sector having a huge impact on your portfolio.
4. Do your research
As the saying goes "Knowledge is Power" and when it comes to investing, this is a very important thing to keep front of mind. It is very important to do your research about any investment your looking to get into. Ask as many questions as possible and ensure your comfortable and understand "how your making money" and "what are the risks".
5. Have a financial planner on your team
Having a financial planner will ease a bit of the pressure in managing your wealth. With both in depth knowledge and experience, a financial adviser can help you build a financial plan tailored to your financial goals. Even as your circumstances change and the financial environment evolves, advisors will work with you to make any adjustments that are necessary to keep your plan on course.