Finance Money 7 years ago Share Tweet Slow and steady wins the race in investing. For every successful get-rich-quick hare, there are a thousand that end up road kill. Emulate the tortoise instead. Follow these five rules for slow and steady wealth-building: Keep it simple. Investing is actually pretty easy if we don’t let our egos get in the way. If professional money managers can’t beat the market averages, then the average guy shouldn’t try. The financial industry’s marketing manipulates our competitive male egos into believing that we can get on the fast track to wealth by picking the right stocks or shares. I mean even a baby (albeit one that talks) can trade stocks! Don’t fall for it. Get Rich Slowly Don’t be a hero. Forget about what the stock, bond and real estate markets returned in the 1980s and 1990s. For reasons that are difficult to explain, the great bull market of the 80’s and 90’s was driven by a unique set of circumstances that comes along once in every two generations. From today’s levels, you can only reasonably expect to achieve about a 6-7% long-term return on a stock portfolio and a 3-4% on a bond portfolio. It is what it is, so don’t fight it. Know what you are saving for. Having clear savings goals makes it easier, so draw up a life plan. For retirement, you can find retirement and superannuation calculators online or talk to a financial advisor about how much you need to save. For starters, max out your super from as young an age as possible. The money comes out of your paycheck pre-tax, so you don’t even notice it’s missing. Unless you are truly destitute, just do it. You’ll thank me later. Manage your risk. If you’re saving for a deposit on a house in the next few years, you want to keep the money safe in liquid investments like cash and short term bond funds. If retirement is 25 years away, retirement funds can be heavily in stocks. For intermediate time horizons, use a combination of stocks and bonds. There is no “free lunch” in investing: the higher the return, the higher the risk. Allocate your assets according to the timing of your liabilities. Minimise taxes. Provided you are managing your need for liquidity, you may want to favour having investments like taxable bonds and real estate. Also, trading investments too much costs you extra taxes and fees. Over the long term, taxes add up to a major drag on savings, so don’t ignore them. Go slow, be smart and build wealth the right way. After all, we all know what happened to the hare.