WEALTH CREATION FOR ALL

HOW TO DO WEALTH  CREATION ?

Wealth creation happens over a long  period of time only. The secret ingredient to wealth creation is Power of compounding. As we know Einstein told that- Compounding is the 8th wonder of the world.

But the power of compounding does not work efficiently for goals less than 5 years of time horizon. Hence the approach to achieving the goals that will mature in less than 5 years will be different from the ones that are more than 5 years away. Investing in equity funds for short term goals can be fatal if the market turns unfavorable.

For goals beyond 5 years the focus should be to maximize returns; whereas for goals that will mature in less than 5 years, the focus should be to preserve capital and to ensure to generate better post-tax returns when compared with fixed deposits.

It is better not to change the investment plans too often, just keep a watch on your goals. If you have long term goals, as you get nearer to your goals, shift into lesser riskier product. Keep your investments simple, which can happen with slight knowledge about investing. Stick to the plan, monitor it regularly, invest keeping the goal in mind, and do not get affected by short term volatility.

Don't get distracted by marginal performance difference between schemes, as long as you are invested in good funds, the returns tend to average out in the long run.

Now, how to create wealth?

The planning process for wealth creation involves determining how much money you will need to fund your goals?  how much would you need to invest either monthly or one-time to achieve that goal and choosing an appropriate product that best suits the time horizon of investment, providing optimum returns and minimum risk.

How much returns in wealth creation is required?

It is quite obvious that higher the return over your investment, more is the wealth that you are going to create for yourself. Your investments have to earn a return which is enough to meet your financial commitments. But at a very basic level, your post tax investment return should at least match the inflation levels just to stay afloat.

If the return falls below the prevailing inflation level, your wealth would be eroded or destroyed. The purchasing power of your wealth weakens gradually over time if it under-performs the inflation level. So, inflation would be the floor level that your wealth would have to earn post-tax over time.

With the coming of social media and YouTube,  we can learn about investing, ways of investing, where to invest & most importantly how to invest etc. Thus the hassle is reduced, as we can invest in good funds with basic market knowledge and hence ensures that you can create your wealth very confidently.

To read about wealth creation using goal based investment  visit here