Ten commandments of wealth creation

Ten commandments of wealth creation


Wealth creation is not a random event. Luck alone cannot make you wealthy. It requires meticulous planning and lots of discipline. To build wealth, you must follow time tested rules and to remain wealthy, you must follow those same rules. Here are the ten commandments that can help you create wealth and, of course, remain wealthy.

  1. Start early: Compound interest is like a small snowball rolling down a hill. The longer it rolls, the bigger it gets. At the age of 20, if you start investing Rs.10,000/- monthly @ 15% per annum, you will retire at 60 with a corpus of Rs 31.40 crore. If you delay and start at 40, you will retire at 60 with only Rs 1.52 crore! You may argue that if you start at age 20, you would have invested more and hence the corpus is more. Even if you decide to invest twice the amount (Rs 20,000/-) every month from age 40 to 60, the total amount invested by you remains the same (Rs 48 lakh), but the retirement corpus will be just Rs 3.03 crore.
  2. Live within your means: The habit of spending more than what one earns afflicts people at all income levels. Debt should be used sparingly for assets that appreciate or allow you to make more money. For example, a home loan or an education loan makes sense. Using debt for consumables or things that go down in value does not make sense. Impulse or emotional buying are recipes for financial disaster. Before making any major purchase, you should consider if it is a “need” or a “want”. If it is a “want”, you should make a conscious decision about whether or not you can afford it. These days many use a credit card as “A tool to buy things not needed, at a price they can’t afford, with funds they don’t have.” Set a goal to live debt-free.
  3. Seek professional advice: Do you visit a dentist for legal advice or a plumber for heart surgery? Then why not seek professional advice for your investments. Often brokers show you the track record of a mutual fund. First, check their track record! Don’t get stuck with a salesperson.
  4. Don’t speculate: Don’t speculate as money is slippery and hard to keep. Don’t gamble your hard-earned money away on stocks you know nothing about. Even with complete due diligence, you will end up with some bad investments. The trick is to avoid significant losses.
  5. Follow a sound financial plan: Most investors do not have a plan. Their investments represent a collage of ideas sold to them by different salesmen over their lifetime. There is no room for gut feelings. Jot down your goals and plan out your investments to meet them.
  6. Be Patient: We live in a world where two things have been forgotten; commonsense and patience! Marathon runners are not necessarily the strongest and fastest. They have the patience to wait for the perfect time to make that final burst of speed. Same with investments. Only the patient investor ends up creating long term wealth!
  7. Don’t Panic: Don’t be greedy either: Bull markets brush negative news under the carpet just as positive news is greeted with scepticism in a bear market. Stock markets cannot go up or come down forever. Greed and Fear are two emotions to be kept under control to be a successful investor.
  8. Create a contingency fund: The world has become an extremely challenging place. You’re never warned of an impending setback such as a medical condition, a business downturn, or a job loss. Create an emergency fund to cover your living expenses for at least six months.
  9. Have adequate insurance: Medical expenses ruin a lot of retired people. The bottom line is you need to take action to cut your risks. It would be best if you were concerned with insuring four areas: your possessions, life, health and finances.
  10. Plan your estate: Your first step in estate planning is to write a comprehensive will that moves smoothly through the probate process. You must have nominations registered in all your assets. Seek professional advice.

Views are personal: The author is Shibu Das, Founder of Fine Advice Private


Disclaimer: The views expressed are of the author and are personal. TAML may or may not subscribe to the same. The views expressed in this article/video are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you.


Mutual Fund investments are subject to market risks, read all scheme related documents carefully



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