Question

Can you prepare a summary of 1000 words to apply The 7 Habits of Highly Effective Investors? in order to have high-impact as student success in your course that benefits and sustains in university and beyond. Highly Effective Investors

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These are the basics of running your financial life.  Investors are nervous. They’re worried the decade-long bull market in stocks is on its last legs. The good news: There are some simple steps you can take right now to firm up your financial position and increase your peace of mind.  Many people get stressed even thinking about managing their money, seeing it as just too complicated.  Here are seven simple ways to increase the chances of getting in—and staying in—good financial shape.

 1. Start to Save as Early as Possible  2. Understand the Effects Compound Interest  3. Set an asset allocation and diversify  4. Save Consistently and Systematically  5. Use Strategy Over Prediction  6. Spend less than you earn  7. Understand and Respect Risk

Answer 1

Ans: Summary of 7 habits of highly effective investor is as follows:

1. Start to save as early as possible: An effective investor start saving its money from the very early age as he knew saving would ultimately result in acheving the goal & early saving help him to set aside less amount to reach at desire goal then the letter one.As Interest on early saving is higher than latter one due to compounding effect.

2. Understand the effect of compaound Interest: An effective investor understand the impact of compounding or alternative some people called as he knew impact of rule 72.( e.g. If you invest $100 at 12% compounding interest then your money would get double in 6 year ( i.e. 72/12)). which get him start saving as early as possible.

3. Set an asset allocation & diversify: A smart investor have specific financial goals & he invest accordingly. An effective investor always belive in diversifying the portfolio i.e. he never put all his eggs in one basket. Because he is well aware of the fact that investing all the money at one place might give adverse result . e.g If you invest all your money in 1 company & that company due to any reason goes into bank corrupsy goes into bank corrupsy then you would loose all your money instead if your money in different sectors & different copanies then you will only loose only a small part of your money not entire wealth in case of adverse news.

4.Save consistently & systematically: An effective investor always save money on consistent basis & invest in different sector on systematic basis that would lead him generate the wealth over a period of time. for example, If you investment systematically by using SIP instead of timing the market then you will be able to invest in market at all the prices which eventually result into the creation of wealth.

5.Use strategy over prediction: An effective investor always follw strategy for the investment in the market instead of making prediction because when we predict market then we most of time loose the money or get irregular high or low return. But when we invest strategically then it would reduce the risk of loosing the money & help you to get a limited but consistent return on investment.

6. Spend less than you earn: If you spend everything that you earn then you would have nothing to accumulate to generate the wealth. A smart investor always spent less than what he earn to generate the wealth for meeting its financial goals. he always follow the rule of saving first i.e. to make expenses after setting aside desired saving for meeting from the income.

7.Understand & respect the risk: A samrt investor knows that all investment had certain risk relates to them &higher the risk , higher the return. So he invest only after analyzing risk of all the investment & considering his risk apetitie. A smart investor knew the risk of market not behaving rationally & thats why he always kept certain portion of its saving in risk free modes to meet its financial emergency in case of need and to face situations when market not behaving rationally.