The idea of becoming a millionaire is a dream that many of us have, though it can often feel completely out of reach.
While we’re not going to claim it’s something that comes easily or will happen overnight, becoming a millionaire isn’t as difficult as it seems.
Gone are the days when only those who come from family money, or have the right connections are able to make millions; nowadays, with social media and technology leading the way, opportunities exist for everyone.
In this useful guide, we’re sharing some of the top 5 investment tips from a professional investor and highly successful South African entrepreneur, the co-founder of online loan disruptor Wonga, and angel investor, Errol Damelin, to show you exactly what it takes to invest wisely and become a millionaire.
If you’re new to investing, it can seem very daunting and even a bit scary. However, with the right strategies and knowledge, you can increase your chances of becoming a millionaire.
The key to investing is to take your time and understand that it’s a long-term strategy – not an overnight success. You also need to have a plan and stick to it, deviating from your strategy is a classic error.
Investment Tip 1: Have a Goal
Just as you would with any big financial decision, you need to know what your goal is when starting to invest. Do you want to become a millionaire in 5 years? 10 years? 20 years?
Once you know what timeframe you’re aiming for, you’ll be able to take the right steps to plan your investments accordingly.
The mistake many people make here, not just with investing but with setting goals in general, is that they’re too vague. Saying, “I want to be a millionaire one day”, isn’t enough.
A clearly defined goal will motivate you to stay on track and make suitable investments.
Once you have set a goal, you’ll need to figure out how much money you need to invest each month to reach it.
Investment Tip 2: Research, Research, Research
Investing is not something to take lightly – there’s a good amount of risk involved due to how volatile many markets are, so doing your research before investing in anything is key.
Of course, there’s never any guarantee that your investment will pay off no matter how much research you do, but at least give yourself a chance by taking time to understand the risks as well as the potential returns.
Researching the markets and the different investments available will help you make more informed decisions, and of course, you should research different investment strategies.
As part of his investment strategy, Errol Damelin chose to focus on specific sectors, such as fintech, crypto, and SaaS (software as a service) so that he could help founders of companies within these companies achieve success.
It could be said that he followed the famous advice of well-known stock market investor Warren Buffet by investing only in what he knows as a professional. I.e. he applied his working knowledge of specific industries and businesses to ‘vet’ businesses and determine their growth potential relative to their current share value to find those bargain prices.
However, investing is not a one-size-fits-all approach. Different strategies may work for different people, so it’s important to find what works for you.
Investment Tip 3: Have a Diversified Portfolio
Diversifying your portfolio means that you are investing in different things instead of putting all your eggs in one basket. This will help you reduce your risk and increase your potential returns since you’re not just relying on one single investment.
For example, you could invest in a variety of stocks, bonds, mutual funds, and real estate. It’s also wise to consider diversifying your investments across different sectors. For example, if you are investing in stocks, you should diversify your investments across different industries (tech, manufacturing, transport for example) as well as different countries including some emerging markets.
On the other hand, diversification doesn’t have to mean investing in different sectors. Coming back to the case of Errol Damelin, who is known for his investments in fintech, he’s equally known for investing in companies at different growth stages, which is equally a form of portfolio diversification.
This helps to diversify your risk and increase your potential returns.
Investment Tip 4: Invest for the Long-Term
Most investment strategies, whether it’s the stock market or even property, should be considered long-term investments. Many people find this a scary prospect – especially when thinking in terms of 10 or more years as they worry about inflation and money losing its value.
However, investing in things longer-term can help protect your investment from the inevitable inflation and even things like economic uncertainty like the crash of 2008 and even the situation today.
Adopting the long-term mindset when it comes to investing is a great way to increase your wealth over time.
When you invest for the long-term, you should focus on investments with low risk and high potential returns. Investing in stocks is an excellent example of this.
Another great way to invest for the long-term is to invest in index funds. Index funds track a particular index, such as the S&P 500. Investing in index funds is a great way to diversify your investments and reduce your risk.
Investment Tip 5: Monitor Your Portfolio
Even if you have a diversified portfolio and have invested for the long-term, you should regularly monitor your investments for any changes in the markets.
However, it’s essential to understand that although your investments will inevitably go down and it seems like you’re losing money, they will go back up again, so you should never act out of fear and cash out your investments – these fluctuations are normal.
It’s not a great idea to check investments daily or even weekly, but if you set aside time to check them once per month, you’ll have a pretty good idea as to what’s going on and be able to spot specific trends. You should also keep track of industry news and any significant changes in the markets.
We hope that this guide will help you understand a bit more about investing and how to get started with it. Making the right investments by following these tips can help you reach your financial goals, but as with anything, they should be followed with care and in line with your personal circumstances and goals.