How to Create Wealth ?
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Learn it from the Mr. Raamdeo Agrawal, Chairman, Motilal Oswal Financial services on Learnapp. Get the subscription & access to all the courses from such leaders
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Wealth creation is a result of investing in various classes of assets and increasing the income flow. This results in an additional source of income and helps increase the pile of savings with an individual. This is how wealth is created. Hence Wealth creation and income generation are two totally different concepts. Wealth is created when income is generated through additional resources. In other words we can say that income generation is a subset of wealth.
For wealth creation one needs to be patient. This is a very long process and not an overnight gain. One needs to be efficient over a decade and earn continuously and diversify the sources of income and at the end of this rigorous process one can create wealth.
Wealth creation begins with setting goals. One should plan small goals and achieve them. The most preferred way to create wealth is investing into the market.
Investing into the Market
How could investing create wealth ? The answer is ploughing back of profits and reinvesting. People apply the strategy of earning and reinvesting. For example : If you earn 500 Rs from an investment of 8000 Rs over a quarter, the ideal way is pulling out these profits and investing them into more quality stocks. Hence diversifying the portfolio and investing wisely.
For best investment plans Mr. Ramdeo Agarwal suggests the QGLP model. It means Quality stocks with Growth opportunities having a long term price increase which are available at cheap prices. Hence meaning :
Q – Quality
G – Growth
L – Longevity
P – Price
Learning investing at an early age is the best option. One can start investing as early as in their 20s. The benefit achieved is the corpus available at the time of retirement would have grown multi fold during all those years of savings and continuous investments.
One should set rational and small term goals to begin with for creating wealth. Step by step – start setting goals and prepare a roadmap to the extreme end. Once the roadmap is fixed you can start investing accordingly. There are various options like mutual funds, equities, commodities, government bonds and securities, Sovereign gold bonds, SIlver,m Gold etc. Once the amount of investment increases, simultaneously increase the investments. This will boost up the sources of income. With all the investments in one asset class the risk associated increases drastically and with all the investments in a variety of asset classes the investment gets a balance and it results in a low risk profile of the portfolio.
With quality assets and quantity of income generating options the flow of income keeps on increasing and this results in creation of wealth.
Importance of Wealth
Wealth is like a corpus that could be used in times of difficulties or for survival. Who doesn’t like having some extra cash. The majority of people have to work till their last breath to earn their daily bread. Isn’t it wise to start investing early before the time comes when one is not able to work anymore.
It is the primary purpose of wealth creation. Everyone needs to save for their future because there always comes a time when they are not able to work anymore. This corpus leads the continuity of the standard of living in such times.
No one knows what is gonna happen in future. One fine day you wake up and you get diagnosed with a fatal disease or you get to know that your house needs renovation due to the cracks or you lose your job and have to start over again. All these are uncertainties which cannot be known in advance. Hence it is necessary to invest consistently for having some extra row of cash in times of difficulties.
The early you begin investing the more wealth you can create. Wealth creation is a long term process. It needs diversification of income streams and investments in various assets classes. Hence creation of wealth requires patience and quality investment.
There are chances for losses when you invest and you cannot avoid them. But what you can do is minimize the risk profile as much as possible so that one can get a stable income. Hence learn investing as early as you can. Start your own prices of creation of wealth and one fine day you would feel grateful about yourself for all the investments you have made in the long run. The reason being, “Everyone loves some extra cash”.