7 Strategies to Create Wealth in 2009

Written on the 12th of January 2009 by Nicholas Sinclair - Good Onya Australia's Business Finance Gun

New Year, New Life – Make 2009 the year you start creating wealth. Here are some tips to get you started.

1. Start Planning for your Future, don’t react to events:
   Many people wind up reacting to events rather than designing and implementing a financial plan. The future will come whether you plan for it or not. Will you have the future that happens to you by default?  Or one you have designed?
    
2. Eliminate emotion from your investment decisions:
   The emotions of fear and greed should have no place in your investment decisions. Investors who panic when markets are sharply falling, and become overly exuberant when markets are sharply rising, are following an almost sure formula for losing money.
    
3. Stick to the long-term asset allocation of your portfolio:
   In most instances, if the long-term asset allocation of your portfolio was appropriate before the market began to fall, it is likely to be still appropriate today. This is provided that your personal circumstances – including your tolerance to risk and financial needs – have not changed. Therefore, your portfolio is most unlikely to require a drastic makeover in light of the current market havoc.
    
4. Focus on things that you have control over:
   Rather than becoming overly concerned with what is happening day-to-day in the markets, concentrate more on what you can have control over. For instance, reduce your debt (particularly your non-deductible debt), minimise capital gains tax on your investment portfolio by keeping the turnover of your shares to a minimum, and check whether you are paying excessive funds management fees. Further, re-examine your personal budget, looking for ways to save money. By the time you have finished these practical  tasks, share prices may well have begun to turn upwards again and any temptation to flee the troubled market may have passed.
    
5. Don’t overlook the true costs of selling:
   The selling of quality stocks at depressed prices is a wasteful exercise. It will crystallise the fall in stock prices, trigger capital gains tax on any past capital gains, and prevent you from fully benefiting from the inevitable market turnaround.
    
6. Use the market downturn as a selective buying opportunity:
   Concentrate on quality stocks that have been hit hard. This means investing in companies that are market leaders, well-capitalised and that have excellent management teams. But buy in the knowledge that the market could continue to fall for some time before its eventual turnaround. Take a really long-term perspective and don’t count on any quick profits.
    
7. Drip-feed your money into the market:
   This means rather than investing all of your capital into the market at one time, invest it regularly in equal proportions over the next six or 12 months. You are less likely to lose capital if the market continues to fall over the next few months, yet you should be well-positioned to enjoy the benefits of the market rebound.  And you will average-out your buying costs over your buying period, and reduce the possibilities of being hit by a sudden fall or rise in share prices over a short period.

If you do your planning and take advantage of all the opportunities out there, 2009 could be a very wealthy year for you!

Nicholas Sinclair is Director and Senior Financial Planner at Wealthfarm Financial Planners - visit www.wealthfarm.com.au for more information.

Note - This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances.  Please seek personal financial advice prior to acting on this information. Nicholas Sinclair and Wealthfarm Pty Ltd ACN 119 411 175 t/a Wealthfarm Financial Planners are Authorised representatives of GWM Advisor Services Limited Australian Financial Services Licensee No: 230692