Money is to be earned, Rich is a feeling, but you have to go and Create Wealth!
This is the noblest and Sincere effort that goes into creating Legitimately created wealth. On the road to creating wealth you start living and behaving like a monk and people say “why does he need so much wealth” Or “he is such a miser” – but it is YOUR amazing choice of living a simple life, but creating an heirloom for your future generations!
What are the things that you need to create wealth?
Patience – understanding that in the Compound interest formula, ‘n’ is the hero, and it takes time to compound your money!
Discipline – to invest regularly, and be willing to be in equities for a real long period of time. Each generation has a life of say 90 years, out of which they spend 30 years in earning money. You need to spend at least a few years learning about how to use/grow the money.
To yield good returns on long-term assets such as equity, gold, & real estate, one needs to have patience. There is no shortcut to success, appreciation in assets take time. It takes 6 years for a small mango plant to yield fruits. Discipline when investing in equities can lead to superior returns, as ups and downs in equity is the norm. staying invested in quality assets is key to value creation.
Mathematics – never very interesting, but you have no choice. Along with patience, discipline, Math is also very useful – mean, median, mode, standard deviation, regression to the mean, Variance, Co-variance – knowing all this is simple, but surely worth knowing.
Even if you belong to a very risk averse household – most middle-class and lower middle class people have survived by being risk averse. So it is necessary for you to learn to increase your appetite for risk. Your ability to understand, and manage risk instead of trying to avoid it will take you a long way in making you a good investor.
Learn about Asset Allocation, Risk Reduction, and portfolio diversification. When you invest in various asset classes, you will benefit by controlling your feelings – 2 asset classes may move in opposite direction!
Call it bias or whatever – I do think that for the small investor – who can invest from Rs.500 to Rs. 5000, there is not too much of a choice, he has to start with Equity.
Most Importantly, Focus on your Goals, Learning, and the wealth creation Journey. Learn to enjoy the process!
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