Wealth creation is a time consuming, easy to understand and very difficult to implement process. There are no cut fast rules on how to create wealth.

Deepak Parekh, Uday Kotak, Rashesh Shah, Nirmal Jain, Raheja, Hiranandani, are all people who have created wealth by the greatest method. Run a good business, leverage with people and brand building. Leverage with geography and borrowed funds….then take the company public. By doing this every rupee of earning gets valued at 30 for Mr. Deepak Parekh (Hdfc has a p/e of 30) and similar numbers for the others. These people made their money from equities, debt, commodities and of course listing their companies!  I am not talking that league, yet.

Let us see what all you should know – we will start with 10 steps:

1. Understand the Power of Compounding: it looks odd to realise that the power of compounding is NOT taught well at school! They give you some simple examples – rarely are you taught the POWER! Even people working in financial services do not appreciate the power of compounding. Ignore this only at YOUR OWN PERIL.

2. Understand the Power of NOW: LEARN the power of starting to compound as soon as possible in life. If you have not understood, NO TIME LIKE TODAY..pick up the pen, call the advisor, click on the net – whateva…just start, NOW, TODAY.

3. Understand the Power of Regularity – start a SIP AND make sure you do it regularly – not missing a single month. If by chance you do miss a month of investing, immediately pick up a cheque and send it in! At the end of a YEAR you should have invested 12* Amount being invested every month. If suddenly you have money, top up the SAME account.

4. Understand the power of Not Touching the Money for ‘n’ years: Capital and Wealth creation needs long periods of growth. If you do not touch the money for any sundry purpose, leave it untouched. This helps in compounding. REmember this for life!

5. Understand the power of LEARNING: If you are willing to wish to invest in equities – directly or through mutual funds,    learn as much  as possible about equities. Invest in learning, before you invest your money.

6. If you do not (or will not) learn about equities, never mind, learn the power of indexing in equities!

7. Learn simple things like keeping your accounts in an excel sheet and keep track of the paise….the rupee will take care of itself. Track your income, collect all monies due, track your expenses, track your investing and returns.

8. For events which you know invest. For sad events which MAY happen, insure. You never know….

9.Remember delayed gratification may not be easy, learn it. Food which gives 30 seconds of pleasure on the tongue stays in your waist for 30 years. I understand this….but when I see a sweet I still fall for it. Knowing and implementing are completely different animals. Alas!

10. Invest in education, training, health, travel and fun. Very important to remember do not forget the present for doing something great in the future. The future is important, but the present is vital.

 

 

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  1. Dear Subra Sir,
    Shouldn’t we call these the TEN COMMANDMENTS of Finance.
    May I suggest one more addition similar to point no 2. i.e. “Understand the power of NO”, which obviously is based on a recent article of yours. It is very necessary to protect our earnings in addition to the actual earning itself
    Since i came in touch with your blog about 1 year back I have tried to practice all these points to the word.

    Thanks for enlightening all of us
    dr kishan

  2. @ t s ashok
    as i understand , the index fund is representing the equity shares of the underlined index for exact proportion (minus a little trailing error), and the indexes themselves represent the most prominent equity shares for the segment/sector/capitalization what they represent , and so index funds have no bias of the fund manager, and so their expense ratio is suppose to be lower than the actively managed funds. you can expect the return from the index fund in line to the underlined index, so for the investor without any experience (but having faith for good for the particular economy and particular segment/sector/capitalization) could go for that underlined index fund without more effort. however it has all general risks of equity investments. and for indian context, it is said that till now, the equity funds managed by good fund managers have rewarded the investor far better than index funds on long run, so a liitle more study through sites valueresearchonline.com , morningstar.co.in can help you to select better funds than index funds. but if you do not want to learn about equity investment and still faith in the economy/sector/capitalization for long time frame you can go for the appropriate index funds , and you will get at least the fruits of the growth of the underlying .

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