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Best Ways to increase your wealth


Wealth as same as Love is crazy. For some wealth is nothing but living a contended life with whatever they got till now, for some it is “there is nothing like today” and for some they keep increasing their wealth astonishingly automatically.

 

Look at the four quadrants shown below, 

 Financial-Quotient-your-money-matters

 

it is from “Rich Dad, Poor dad”. Ask many who had turned entrepreneurs everyone will say their inspiration is this book. The four quadrants speaks for itself. Employee and Self Employed people are so engrossed in their work that they are not able to look for passive income and they cannot live without Active income in the form of salary or regular orders. Business owners are some one who is an established player in their field but still depends on regular orders to run the show. There will be others employed under them to get the work done. 

 

The last category is Investor which means the money earned works on itself. Money working for you is multiplying on itself and compounding which generates passive income. The best example is person getting income from multiple sources. Bill Gates had retired from his company years back, but he earns billions of dollars still and he does philanthropy out of it.

 

Why you need to increase your wealth?

 

“Health is Wealth”

without health nothing is important. You would have heard many families were the entire wealth has got eroded to save the life of one person. Maintaining once health is equally important when it comes to creating wealth. Ask any of the entrepreneurs, for them “Health is Wealth” as it keeps them fresh and gives them the much needed energy for running the daily show. 

Our new TCS Chairman Mr, N.Chandrasekaran, is from Tamil Nadu and has the habit of participating in all the marathons across the world. This is due to the habit of daily practice which makes it easy for him. In Indian cricket too now more focus is on being fit rather than being athletic on the field. Virat has given more focus on high stamina exercise which had transformed him into a much bigger player on the ground.

 So generally health helps a lot and it helps in growing wealth too. Need for wealth is that it keeps depreciating and you need to be sure that it grows on its own. From the ancient period, wealth is grown the trading it happened among the fellow members in a town or region. Those who hold food items will sell it for buying other needed products for farming and vice versa. Based on supply and demand, the price of product varies. In this modern world everything is set for trade and you need to have money to buy anything. On top of it inflation rises every year which is nothing but increase in rise of product. Wealth is needed to counter this increase in inflation every year.

 

Below is the inflation chart for the last 20 years,

 Inflation Index - your-money-matters.png 

Average inflation for the last 10 years is around 8% and average inflation in the last 20 years is around 7%.

 

Apart from this another main reason is that the price rise is astonishing in the last 10-15 years and further most of the needs has become essentials in this new era. Phone which was considered as one of the need has become an essential one in everybody's life from a kid to the elderly person.

 

   “Needs had become Essentials” in this modern world. Consider anything mobile, internet, TV, entertainment etc, etc (2 etc as the list goes on and on) had become very much essential for everybody. 

 

For example, If you think that you have 50 lakhs of PPF amount after your retirement in this year 2017 at the age of 60. It may be sufficient for the next 15-18 years based on your investment and monthly expenditures. You should not spend more than 30,000 per month for this entire period. Most of you would have been so eager at least to go on a pilgrimage tour after your retirement and live life carelessly, but after this small calculation are you worried about your corpus which may get vanished quickly ?

 

Millenials doesn't have the habit of saving(mostly, though not everybody) and keeping their PPF account alive ,as most of them close their account as and when they shift their jobs. This depletes the retirement corpus as well as the sense of being wealthy. Most of them thinks that the money they earn makes them wealthy, but the truth is that they should be able to make their money to work for them instead of them working continuously till their last breath. Make sure Your Money Matters

 

Top reasons to increase your wealth may be,

  1. Infation
  2. Lifestyle expenses
  3. Health expenses

 

Wealth;

 

We had already seen that value of wealth may differ with people, but ultimately the amount of wealth is measured by its value. Here is the list of top 5 richest persons in India as reported in Forbes,

 

Top 5 richest person-your-money-matters.png

 

Source : Forbes

In the past wealth is measured by the amount of Gold you hold, only the persons who held high positions in the kingdom along with the persons who engage in trading were considered as rich. As Industrial and other revolutions happened, wealth is measured by the total assets you have more than the liabilities. Some of the richest persons borrow in the name of their company but still they are considered as they don't have liabilities in their name. Another engaging point provided by some of the major richest persons is that you can take risk by borrowing to make it rich. If you are in to business you can borrow to grow big, else you will be squandering happily with the same level of income. If you are salaried working class, no worries you can become rich by investing into equities.

 

Wealth can be acquired by investing in equity and making more money, investing in real estate, Gold, Precious metals, Wine etc

 

Real Estate;

Real estate is one of the easiest way if you talk to anybody in India, many still have the habit of buying land and hold it till they want to sell it. McDonald is one of the Global major who followed this path, they had bought the land for their outlets and only in the last few decades they had started expanding by franchise model. Advantage of buying real estate is that you can keep mortgage during crisis times, but this doesn't hold true. During 2007-08 recession, all the real estate prices had fallen to more than one-tenth price due to mortar crisis which existed throughout United States. You wouldn't have been able to sell your land or flat during that time. 

 

In India we didn't had such a situation till now as the economic growth is happening slowly and steadily and with the Governments ambitious house for all schemes, this crisis can be a reality in India too. 

 

Apart from this the real growth % of real estate sector is only around 10-12%. Among the global cities, Mumbai ranks in the top 100 of highly populated cities and hence the rates are high. From early 90’s till 2000’s the growth were very much subdued or even flat. So there will always be a flat or lag period and then there will be a high growth period. Many still have the idea that this sector is ever green and looking for quick money like buying and selling in 4 years should make them richer by a minimum of 50%. One of the person has brought a flat near SEZ which had top notch companies and even a railway station nearby connecting to chennai. Another point is that it is located very nearby the highway. So with all these amenities they were able to sell only at below the purchase price after 5 years when they were looking to sell and make their girls marriage.

 

Gold;

 

Gold can be called as evergreen way to generate wealth as this exists from the ancient period. Many wars and many dynasties were brought down just in search of more gold. Gold still holds the fascination of many and in particular women, men see it as Investment opportunities. In common it can be a hedging tool which helps in protecting your wealth against inflation. 

 Please find the price chart of Gold in the last 20 years,

 

Gold Price chart-your-money-matters.png

 

in the last 5 years it has been volatile and stayed int he same price range. Price had moved slowly during the period of bullish equity period and during the recession period it almost doubled. These details say that during global turmoil or any recession Gold can be the only dependent financial wealth creator. Gold price movement can also be said as the apposite of equity. Even during US president election when Trump was elected, there existed uncertainty and everybody said that it will drive the price of gold. Equity euphoria were brought back and US stocks had moved by more than 12% which is one of the top rallies in the US stock movements.

 

Precious Metals;

 

Gold is the only precious metal we all know, there are few other metals which you all must be aware and which can be used for investment purpose as well. Platinum, Aluminium, Zinc, Copper are some of the precious metals.

In India you can find only some funds which invest only in Gold and some invest in the gold mining companies. In US there are some companies which invest in all precious metal mining companies. Though this exists for the last few decades it hasn't created any wealth if anybody has invested, but holding these precious metals can be done only by the wealthy guys.

 

Wine Index;

 

Wine Index similar to Stock exchange was formed in 1999. It provides the platform for the merchants to trade wine. It provides two general wine price indices and these transactions generally used to gauge the general price development for the “fine market” in general ( source : Wikipedia)

 

Equity;

 

Equity as a wealth creator was first formed in 1698 in London. Though it existed before as well, we don't have any history of those. SO as per documented data first stock market in the world was formed in 1698. Now it has the list close 2700 companies in its exchange spread across the world. The next was New Your Stock Exchange in 1792 and American Stock exchange in 1849.

 

In 1875, Bombay stock exchange our very old Sensex. Now it has trade value worth more than 9.8 billion dollars traded every month. Everybody believes that stock market is wealth destroyer and it has done so for many families who had indulged in it. Stock market gives many opportunities and only few and rare who understands can make wealth out of it. Reason for many losing money in this stock market is that many see this as an avenue for quick money for their expenses or money in short tenure. 

 

    “Stock market is the place for wealth creator and not the avenue for making quick money”

 

Look at the movement of this index from the base year of 1979,

  

 Sensex Chart - your-money-matters.png

Index has moved from 179 to the current value of around 29000 in 2017. There existed many volatilities but it can create wealth only if you had followed few steps which we can can see later. In any asset it takes time to create value, see the growth of a tree, it takes time for the seed to grow and then to become a tree. Tree takes time to create flower and then finally the fruit. You need to be patience enough for that tree to give the actual fruit. If you treat the equity market as same as a tree it can give value which can give fruit year on year.

 

Let us see some of the stocks which had given great returns in the last 2 or 3 decades,

 

Equity wealth - your -money-matters.png

Source : From Economic times

 

Britannia, HDFC bank, Apollo, Zee entertainment, Hero Motor corp etc are known companies which could have been bought and hold for a longer tenure. Returns % clearly shows that it cannot be matched by any other product. Still many see the equities as gambling market where everyone is bound to lose money. If you follow some simple steps it is easy to create wealth via equity.

 

6 Steps to follow to create Wealth via Equity;

 

1) Never expect quick money

 

2) Be greedy when others are afraid and be afraid when others are greedy

 

3) Buy a company only when you know how they are making money and their target market.

 

4) Buy a company only when you have a term of 3-5 years of holding period. 

 

5) Be a Investor and being trader is almost like losing money for sure on any day.

 

6) Have the habit of never losing money in stock market.

 

Some of the steps are from the words of warren Buffet. People look at him as idle but 99% of them will never follow the words said by him which is the most difficult one to follow. Remember that he had earned more than 90% of his wealth after the age of 49, so you never know the power of equity unless you believe it.

 

6 Common ways people lose their money in stock market are,

 

1) Looking out for quick money

 

2) Trading based on the advise from SMS messages.

 

3) Not knowing the difference between Investing and Trading

 

4) Buying some stocks out of impulse during bull market

 

5) Selling stocks in Bear market out of impulse again

 

6) Not able to digest 20% loses and selling immediately

 

 

Equity Mutual funds;

 

It is always easy to get managed by some one else in office or being a manager and getting the work done by the people reporting to you. You have an option to participate in equity growth by taking mutual funds route. There is a mutual fund manager who helps in investing on behalf of you ad looks to churn stocks based on analysis.

 

So most of the hard work is done by the fund Manager, then still is there a way to lose money, absolutely yes.

 Steps  to follow to avoid losing money in Equity Mutual funds,

 

1) Monitor your mutual urns performances at least once in 3 months.

 

2) Check out the category performance and then compare it with your chosen fund

 

3) Never hesitate to sell if the invested fund is not performing well

 

4) Choose this equity mutual fund only if you can stay invested for the period of more than 3 years.

 

your-money-matters-7.png 

Easiest way to accumulate and preserve the wealth;

 

One of the easiest ways to accumulate and preserve wealth is to approach a Financial advisor. He helps you in identifying your goals and stay invested for the said period. He will bring in self discipline by SIP investment for you.  Investment planning can go for a toss if you don't buy ample insurance. Insurance is basically a risk protection tool, so buy adequate life insurance for yourself,

Adequate life insurance meaning covering your dependents as well.

 

World has become global village, but that doesn’t change the rules of doing business. Mobile Apps, Internet would have made your world so easy for you at single touch, but that doesn't mean you can create quick money so easily. 

 

For creating wealth you need understand the basics of investing or simple ask us ! ! !

Tags: Investment, wealth

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