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f existence is all that life is all about, then why not make existence truly fulfilling? Man's practical wisdom dictated that he opt for a wealth-based lifestyle. By this token,
you would expect every human to be a past master in the art and science of wealth creation. Unfortunately, this did not happen. Until very recently, wealth creation was an art. It depended on individual ingenuity, hard work and luck and the way he could manipulate things always to his/her own advantage. Things have changed for the better since then.
We have now some tried-and-tested wealth creation pathways in place for everyone to follow These methods are truly scientific. They will work equally effectively under all conditions and for all investors.
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INVEST IN EQUITIES
Until the onset of the equity era, wealth was only earned and accumulated. There were hardly any investment avenues for small investors. The concept of wealth creation, in fact, began with the development of equity culture only. The arrival of Mutual Funds gave a further boost to equity investing by making the process extremely easy and investor-friendly.
Risks, volatility, uncertainty and many negatives of the same ilk have failed to deter potential investors in equities. The more precarious the P/E (price to earning ratio), the stronger the urge to acquire stocks. The secret of this uncanny hold that equity investing has over people minds is not entirely irrational. It is based on the knowledge that over the long run, equities have outperformed almost all other asset classes. Today, the lure of investment in equity seems to have captured everyone's imagination. Informed individuals are jumping on the equity bandwagon, without a second thought.
Adding icing on the cake are the recently announced tax concessions. A sum of Rs.1,00,000 invested in equity funds will be exempt from payment of Income Tax, we are witnessing a virtual craze - a mad rush for owning equities in one form or the other. With huge parts of the globe awaiting economic development, the future of industry worldwide is very bright. This makes investment in equities an extremely attractive and tempting proposition. In equities, money seems to have found its true playfield. Join the game and be a claimant to wealth it holds.
-- INVEST IN REAL ESTATE
Until very recently, not everyone could even dream of investing in real estate. Bulk of savings went into bank deposits or post office saving schemes. Masses were ignorant about equity and poor liquidity and large outlays came in the way of property or real estate from becoming a practical investment option. Only kings, and hereditary landlords (who inherited the lands gifted to their ancestors) could boast of owning land. But it is a difference world today. Fat monthly packages and cheap bank loans have brought real estate within the common man's reach. Stories of people becoming super-rich overnight are circulating all over the country.
There is hardly a newspaper worth its name that does not carry full page announcement about new commercial or residential projects at regular intervals. And the booking counters at developers/builders posh offices are thronged by would-be buyers to book a flat or a shop in a project that has yet to be finally cleared by authorities. The boom has taken many people by surprise. The common man is confused. He does not know whether he should jump into the fray at the prevailing prices or postpone his purchase.. The common refrain is what happens if the bubble bursts?
Their confusion, it can be safely concluded, does not have any rationality. When it comes to buying a property for residential purpose, price consideration and market level should recede into the background. It is only when real estate is purchased for investment purposes that one should really bother about the sustainability of current prices in the future.
It is a gross misconception that property prices have always moved upward. True, in India property prices have been appreciating without a pause. But in scientific terms, property is property. It has no nationality. Against the background of globalization, this attitude is of great relevance. What happens to property values in the US or Japan can also happen to property values in India and Australia. In the United States, property price graph has already become flat. In Japan, for many years property prices saw a downtrend. It is a route that may have to be treaded cautiously especially when things seem to be nearing their peaks.
-- THE BOND STREET
Bond is an instrument issued by government or business to raise money and carrying the promise to repay the purchaser by a specified date. Interestingly, the famous Bond Street in London has no connection with one of the most popular investment instrument in the world.
Never a borrower nor a lender be. Apply or act on this wisdom and stop all economic activity, close factories, lock banks and down all business shutters. The world today has thrown out this piece of ancient wisdom to the winds. A sizeable portion of human population consists of borrowers and lenders. In fact, they are the only visible characters on the stage of modern day economic system. They are playing the most crucial role to keep the economic and financial world going. Don a lender's mantle, be a bond holder. People, governments, companies and municipal corporation all want you to lend your money to them. In return, they will issue you a paper stating the amount of money to be paid back in addition to what has been given originally. This paper is known as bond.
Bonds come in various complexions and complexities, Deep discount bonds, zero coupon bonds, municipal bonds, tax free bonds etc. The average investor in India is only conversant with the deep discount bond of IDBI and infrastructure bonds of the ICICI. Bonds have different risk profiles. But it is long term and institutional investors mostly park their funds in bonds. The retail investor accesses bonds through the agency of mutual funds when he or she invests in debt funds. The returns from investment in bonds have, however, not come up to investor's expectations. But the in-built safety of investment in bonds makes this instrument a must for every portfolio although in a small proportion. When it comes to safety, you cannot ignore bonds.
-- TAX OPTIMIZATION
Tax optimization is, perhaps, the fastest method of wealth creation. It works on the age old wisdom which says that "Money Saved is Money Earned". You are merely trying to keep the already created wealth from going into government coffers. And you can continue to do so, so long as you do not infringe the tax laws. Everyone, however, may not be able to take full advantage of the various tax concessions that the tax Act provides. Such individuals should not hesitate to make use of the services of leading financial advisers who provide guidance on the subject without any fee. If your financial affairs are fairly large and complex, it would be worthwhile for you to pay for the expert advice in the matter. One can save up to Rs 33,000 on an investment of Rs 1,00,000 in an equity fund.
-- COMMODITY INVESMENT
Investment in commodities is perhaps one of the oldest means of wealth creation. It began with the purchase of farm produce to help farmers convert their crop into cash. The investor (mostly businessmen) by his activity helped stabilized the commodity prices by lifting huge quantities and releasing the same into the market as per the diktats of the demand. This worked to the advantage of all. With the passage of time the range of commodities qualifying for investment witnessed an exponential expansion. Today it includes, not only field produce, but also a vast array of mineral and industrial products.
Under normal circumstance especially in the recent past, a retail investor would have considered investment in commodities as something beyond his reach. But not any more. Investment in commodities in not any longer out of bound for the small investor, thanks to mutual funds. This grand cooperative of investors enables even a investor with as small amount of money as Rs 500 to invest in commodities and enlarge his investment portfolio, to benefit from broad-based asset allocation. At any given time a particular asset may not be yielding desired rate of returns, the negative impact of this may be off set by better returns from another asset.
-- INVESTMENT IN GOLD & ART
No other material or substance can rival or replace gold as representing wealth. If someone were wanting to meet wealth face to face or know or have an idea of the personality of wealth, what would satisfy him: a piece of land? A wad of currency notes?Oor a stack of blue chip scrips? None of these constitute the image of wealth. Human mind is programmed to accept Gold and gold alone as symbol of wealth. Man's fascination or infatuation with gold is proverbial and as such it does not require any elaboration. But what had hitherto been motivating man to acquire gold, had little to do with wealth creation. The only occasion when he purchased gold was when he wanted to buy jewelry for his spouse. The concept of investment in gold as route to wealth creation is of recent origin. And like investment in commodities, real estate, or bonds investment in gold has been brought into the realm of possibility practicality by mutual fund route. It helps further diversification of investor's portfolio.
Investors money in gold has seen an unprecedented appreciation in recent months. And like the bull run in the stock market, the bull in the bullion seems to have run amuck. Even when it calms down, it will remain a real bull and not a paper bull. Nothing could be more reassuring than the weight of gold nugget in your hand. No wonder, governments world over stockpile gold to tide over untoward situations. As part of asset allocation exercise, gold is perhaps the product par excellent.
Art is asserting for a place in the panoply of investment instruments or avenues. Things have been moving at such a pace, that before a serious thought could be given to the claims of art, it snatched its rightful place and today occupies an enviable position as an investment option worth considering. Recent auctions have seen sales volumes scale heights never reached before. Boundless freedom of choice, the realization that existence is the essence of life, gives rise to an urge for exclusivity, a burning preference for distinction. This manifests itself in the overt action to go in for art. Well, only very few people can afford to dabble or deal in art. Investment in works of art will as such ever remain an option which can be exercised only by a select few.
-- CREATING ANNUITIES STREAMS
Truly speaking, creating a stream of annuities is not the same thing as wealth creation. Little of any significant value is created in the wake of putting your money aside in a very passive financial park, to be used when you are not in a position to earn any longer, or you want to provide pecuniary relief for someone you feel obliged to protect that way. But if wealth also means creating or ensuring peace of mind, a sense of satisfaction, an assurance that you will never face privation then nothing can surpass the utility of annuities. You should be able walk up to your bank and collect enough to stay financially healthy and happy. The joy you derive when you buy your grandchild who had tagged on to you all the way from the moment you left your home a toy or trinket of his/her choice, has yet to be matched by anything else that you can do at this stage.
The seven routes to wealth creation are in fact seven pathways to create , manage, and utilize wealth in a manner that leads to fulfillment of financial goals and eventually to achievement of financial freedom.
