by Barry Marcus

Created on: May 26, 2011   Last Updated: June 01, 2011

Sound long-term investments may provide the key to building long term wealth and achieving financial independence. Financial independence is a goal that is only achieved by a small minority of the total population. However, with proper planning, financial independence is achievable by many more. 

The main principle behind financial planning is to begin investing from the moment that you start earning money. As a rule, most people find it difficult to set aside enough funds to provide for a good investment pool. However, this is something that should be started as soon as you begin earning.

As a general rule of thumb, you should set aside at least fifteen percent of your income for the future. Always follow the rule that you must pay yourself first. The pay yourself first rule must be applied as the first step in your budgeting. The amount that is left after deducting your fifteen percent represents what is available to pay your creditors and for spending.

Long-term investments should be split between equities and property. Equities and property are subject to economic cycles but tend to perform well over the long term. A third option is to invest some of your funds into a retirement fund. Most countries allow for significant tax benefits against retirement funding and is the main reason why these are recommended as a long term investment vehicle.

Life insurance should not be part of your investment portfolio. The only life insurance that you need is term insurance that pays out on your death. Investment type policies do not produce the kind of returns that may be achieved through other investment vehicles. 

Many people see their home as their major asset and biggest investment. Buying your own home is essential and will ensure that you always have a roof over your head. However, do not consider this as part of your investment portfolio. Rather, invest in a second house as an investment. The second property may be rented out - this will cover a significant portion of the costs associated with funding the house. In the longer term the rent on the house will increase while mortgage repayments remain more or less stable. After a few years, the rent itself could provide you with an annuity income. 

Avoid using your own money as much as possible to fund an investment in a second (or third) home. That is what the banks are for! 

Equities may be accessed through direct investment in your own equity portfolio or by investing in one or more unit

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