1. Long-term purposeful investment
Long-term purposeful investment is more important than immediate, present-day consumption. If you want to choose one of the easiest ways to build wealth, deferring enjoyment is the best option. Says chief financial analyst Mike Bridger." If you spend what you're supposed to leave behind, you'll end up with nothing," he says. If you save $200 a month for retirement, you will save about $80,000, which equates to a 5 per cent rate of return. Conversely, if you spend that $200 a month, you'll miss out on more than $30,000 in profits. Experts say that not everyone takes note of this advice because for many people it is difficult to ignore their current material needs.
2. Adapt wisely to credit
Credit is a decent and stable way to build wealth, and knowing when and how to use it as a financial tool for yourself is very important and can help people make huge gains from it. People who can afford to pay off their credit cards every month should try to use their merchant rebate cards more often, or use spending programs that offer cash or other discounts. It also makes sense to defer making payments on low-interest fixed loans, such as certain mortgages or student loans, while making scheduled payments and using the extra money to support your retirement fund first, which is the equivalent of using bank or government money to save for your retirement. Of course, there are risks with this strategy and we need to be aware that credit can also turn out to be an expensive burden on your wealth. Some financial advisers suggest this approach for those who are more familiar with financial management.
3. Laddering method
A type of portfolio approach in which all investment funds are invested equally in securities of different maturities. This is done by first buying the same number of securities of different maturities in the market, in equal amounts for each maturity, and each time the shortest maturity matures, the cashed-in funds are used to buy a new issue of securities, so that the investor always holds securities of various maturities, in equal amounts for each maturity. This is reflected on the chart as an equally spaced ladder, hence the name 'laddered investment method', also known as the 'laddered maturity method'. This method is characterised by simplicity of calculation, stability of returns and ease of management, but does not facilitate switching of securities in response to changes in market interest rates.
4. The barbell investment method
This is a portfolio approach, whereby investors concentrate their funds in two types of securities, short and long term. The allocation of funds between them is then constantly adjusted according to changes in market interest rates. The name comes from the fact that it resembles a barbell with two large ends and a small middle. When long-term rates are bearish, long-term securities are sold and long-term securities are bought, and similarly, rising and falling short-term market rates can determine the entry and exit of both long-term and short-term securities. The key to this approach is to accurately forecast changes in long-term and short-term market interest rates.