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Creating Wealth: Strategies to make your money work for you

By Shlok Kamat

18th Jul 2022

2 mins read

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If you don’t find a way to make money while you sleep, you will have to work till you die - Warren E. Buffet

When are you buying that dream home of yours? When is it that you plan on taking your family for a vacation? To successfully do either of these, one requires money; this ultimately comes from your wealth creation. Wealth? What, How, and Where are the questions we answer here today.

What is wealth creation?

Wealth creation is investing in different asset classes where the investments will help fulfil critical needs. These investments should also be self-contained,  stable, income-generating, and help one achieve their aspirations.

The wealth creation process will be most effective if started early. Starting investments during the early stages of life will give a head start on achieving goals. It also helps in generating higher growth in the long term. This is due to the power of compounding. The power of compounding is a concept that will help build a considerable future corpus. The idea of compounding revolves around reinvesting the returns into the fund to earn higher growth. Therefore, the longer one stays invested, the higher the wealth gain.

Why is wealth creation important?

Wealth creation is essential for several reasons:

  1. It provides you with money to fulfil your future goals.
  2. It offers a steady flow of income even when you are no longer employed or working. This can be a great way to ensure financial stability and help your loved ones continue living a life of comfort, abundance, and security.
  3. Retirement can be a challenging phase with increasing medical and daily expenses. However, with wealth creation, you will never experience a financial crunch and be independent for as long as you live.

Strategies to Create Wealth

There are countless ways to get wealthy. However, the most common and accessible of those is to leverage the true potential of compound interest in one form or another. If you intend to become wealthy fast, you need to understand the risk-reward mechanism. The higher the gain, the higher the risk. With that in mind, here are the ways for you to build wealth in increasing order of the returns

Low-Risk Investments: Grow your money at almost no risks

  • Fixed Deposits
  • General Insurance and ULIPs
  • National Pension Scheme
  • Sovereign Gold Bonds
  • Fixed Income Instruments

Medium Risk Investments: Higher Returns than safe investors

  • Mutual Funds
  • High-rated Corporate Bonds
  • P2P lending

High-Risk Investments: Risk appetite must be very high

  • Equity mutual funds
  • Stocks
  • ETFs
  • Global Equities
  • Startup funding
  • Digital assets

Bottom Line

Wealth creation is simple and easy when done right. Discipline and commitment to investing is the key to creating wealth. Starting early in the career will help multiply returns by taking advantage of the power of compounding. Wealth creation is a continuous process. You need to make a plan and stick to it to meet all your goals. Plus, there is no one-size-fits-all wealth creation solution as each individual has unique objectives, risk tolerance, etc. So, choosing the suitable investment to help you achieve your goals is critical in ensuring you succeed in creating wealth over time.

FAQs

What is the first step in wealth creation?

Like any other activity, you need a plan to create wealth. This is a financial plan which is usually made with the help of a financial advisor and helps you in your wealth creation journey.

How to earn a stable income via wealth creation?

One can invest in dividend-yielding stocks, buy bonds which pay out regular interests, etc.

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Made with ❤️ in India