Imagine firing up your stock broking app and finally seeing that 7 figure amount in your portfolio. Who does not dream of that?!
For commoners, this may seem far from attainable. But truth is, more and more people are managing to accomplish this feat before reaching their retirement age.
No, I’m not referring to “old money” people who invested their family inheritance.
I’m talking about common people like you and me, our neighbours, colleagues and even people working in gas station!
Well lucky enough for us, their secret formula is no longer a secret, as more and more people share how they achieve that milestone, exposing a recognisable framework for successful investing.
Surprisingly, it all boils down to these 3 simple-yet-difficult-to-
“Wait, I thought stock investing is all about picking good stocks?”
That’s the thing, it is not just that!
Let’s spend some time on the first and the most important principle in my opinion.
1. You need to be able to have money to invest.
Duhh.. This goes without saying!
But wait until you realise that majority of people do not even have adequate emergency savings, — let alone money set aside for investing!
This is such a critical first step in growing your portfolio, that, more often than not, people don’t even bother to give it proper thought before purchasing their first stock.
Remember this, your investment cannot grow meaningfully unless you consistently contribute additional capital to it.
Initial capital + invest = Grow
Initial capital + invest + add capital + invest = Grow Faster and Bigger.
This is especially true for those who start with a modest capital and can only invest larger sums as their earnings grow.
Statistically speaking, around 70-80% of your performance is actually driven by the additional capital you invest, rather than the initial amount. (Time is another important factor.)
But here is where most people fail.
They fail to add more to their capital consistently, because they:
- Live beyond their means,
- Have no financial planning or budgeting,
- Have low income or too high commitments.
If you check all the bullets above, it’s clear that you need a major spending habit overhaul.
You may want to take a breather from investing, and that is perfectly fine. Focus on building good personal finance habits first.
It is better to start later and compound meaningfully than to begin now, but see little growth in the future.
For those whose finances are in good shape, be mindful of the three reasons mentioned above. Having good habits is one thing, but maintaining them over the long term is much more challenging.
So, make sure to give as much attention to building good financial habits as you would to picking good stocks. Both are equally important!
In this RT7 series, we’ll be sharing not just lessons and insights on investment strategies, but also tips on how to maintain strong discipline over your personal finance.
So make sure you subscribe to our newsletter all they way to your 7-figure dream!
We’ll talk about the second principle in the next edition.
Warm Regards,
Faqrul
