How to Build Wealth

If your goal is to build wealth, read below some simple strategies that will help you increase your net worth. Strategy one: Start early

Some say that only the early bird catches the worm. In this line of reasoning, the earlier you start investing, the more time you will have to improve your fund management skills and build your small fortune. Remember that building wealth is a lifetime job.

Strategy two: Set up a retirement savings plan

If you are healthy and hard-working now, this does not mean that things will always be rosy. It is always wise to put some money aside that will add up to your retirement payment when you reach a ripe old age. The easiest way to set up a retirement savings plan is to sign up for one that is offered by your company.

Strategy three: Allocate your assets

Many experts consider that having a good asset allocation strategy is crucial to the steady growth of your wealth. It is a good idea to include three or four index funds and one small-cap stock fund in your investment portfolio. You can also pick up some ETFs, or some more exotic assets like, say, commodities. On the other hand, if you are approaching retirement age, you can check out some life-cycle funds, which will automatically rebalance your portfolio according to your investment goals.

Strategy four: You are not George Soros

You have probably heard about George Soros, the tycoon that broke the British pound. Well, what he did happens once in a lifetime and most important, when he planned his strike, he knew that he might lose his money just as well. In other words, Soros had a high level of personal risk tolerance and agile mind, helping him weigh up the odds and plan his lifetime coup. If, however, you try to repeat what Soros once did, you will probably end up broken down instead of rich. Remember that even the most experienced fund managers have trouble beating the stock market.

Strategy five: Don't chase trends

Reshuffling your investment portfolio any time you read the headlines will not help you build wealth, but will certainly rack the nerves of your investment advisor. It is as simple as that.

Strategy Six: Set up automatic savings

You can ask your accountant to transfer a certain amount of money from your pay check to your individual retirement account every month. Alternatively, you can open a high-yield savings account with your bank and ask them to feed it with $100 from you checking account a month.

Finally, the more time you have, the more risk you need to take. If you are wondering how much of your assets you should keep in the form of stocks, subtract your age from 120 and you will get the answer. Thus, if you are twenty years old, you should keep a hundred per cent of your assets in stocks. With time, you may consider diversifying your investment portfolio.