Here Is How To Invest Like A Millionaire

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• Shadab.bogspot.com

The art of earning money can only be understood by some very lucky people. After all it is a difficult process. Difficult yes, but not complicated. Lots of individuals, like me and you, dream of becoming millionaires but to reach that point you need to be smart about the way you handle and invest money. When thinking about your finances, it is important to think of it as a culmination of every money management decision you’ve made up to this point.

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So how do you become a millionaire by investing money? Words like ‘privilege’ and ‘grandiosity’ are what comes to mind when we talk about millionaires. But more than any word, comfort is what suits them best.  And that sense of comfort has become more achievable than what you might believe. According to a survey, inheritance has played a small role in the success of most of the millionaires. In fact they increased their wealth and earned a millionaire status by working or mostly investing smartly.

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“Before you can become a millionaire, you must learn to think like one,” said American author Thomas J. Stanley in one of his bestselling book The Millionaire Next Door. Here are some tips that might help you make the right financing decisions.

Being conservative

Interestingly, studies have shown that millionaires under 40 will make more conservative choices in what they invest into. They make and grow their money the conservative way. According to a research by Capgemini Consulting, millennial millionaires are more likely to keep about a third of their riches in cash locked away in a safe, in a savings account or near-cash equivalents. This is because they don’t want to miss out on any new investment opportunity that might come their way.  The research also found out that as compared to old investors, young investors are more interested in holding fixed income investments rather than taking larger positions in cash holdings and equities.

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Avoiding undue risk

Accorrding to Investopedia, young investors look for ways to reduce risk attached to different investments rather than possible future gains. They are cautious with their money and stress more on risk management than anything else. But it’s also important to understand when to take risks. You need to pay attention to value funds with a long record of stability but whose holdings are less superficial.

“If you embrace risk at the right time, you can actually reduce it over the long term,” says Spencer Jakab, author of Heads I Win, Tails I Win.

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Diversification

Surely one of the biggest mistakes an investor can make is to bet all their money on one company. The simplest way to avoid risk is to maintain a diversified portfolio. The old adage “don’t put all your eggs in one basket” certainly applies to investors. Investors who have been in the market for long enough know that a good asset mix, for example, stocks, bonds, and short-term investments, is the key to reducing risk and earning steady returns.  On average, investors allocate 20% of their investment funds to real estate and the rest is a mix in between alternative assets and fixed-income investments. “They accumulate their wealth by hitting a lot of singles and doubles,” said Tom Wynn, director of affluent research at Spectrem Group. But one should always remember that diversification is only relevant till a point. Once you start to get the hang of this, you should narrow down your portfolio to only those investments that reflect your goals and interest you the most.

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Don’t follow the crowdMillionaires seldom follow big trends on Wall Street. According to them, wealthy people don’t rely on trends, in fact, most of them own hedge funds. On following others, Warren Buffet says, “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Minimizing fees and costs

When minimizing fees and costs, the most popular strategy among investors is the buy and hold strategy where investors hold onto their investments no matter what the market fluctuations. In simple terms, stocks are only purchased and sold when money is needed by the investor, minimizing brokerage commissions and ignoring short-term declines.

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Seek out professional advice

Millennial millionaires should know when to seek professional advice regarding investment decisions. It’s important to do your own homework but equally vital to look for expert opinion. Approximately 80% of millionaires pay for a financial advisor whereas 60% like to make their own investment decisions.

Get your head in the game

Building up your wealth or working your way up to the millionaire status isn’t just about the right strategy; it also requires you to have the right mindset. Sarah Fallaw, founder of the DataPoints, says money making calls for four key traits which are confidence, social indifference, frugality, and responsibility. “These behaviors are linked to greater wealth potential for people of all ages and incomes,” says Fallaw, advancing the work of her father, Thomas Stanley, co-author of The Millionaire Next Door

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Accepting your mistakes

There’s no way you won’t end up making wrong decisions. It’s important you take responsibility for your mistakes, rectify them and try your best to avoid making them in the future. Philanthropist and American investor Peter Lynch says, “You get recessions, you have stock market declines. If you don’t understand what’s going to happen, then you’re not ready, you won’t do well in the markets.”