- Wealth creation is the act of investing and growing your money to achieve your financial goals.
- Wealth creation plans are meant to help you create a regular source of passive income, plan for retirement, and help you achieve your financial goals.
- To create wealth, you must frame your financial goals and start investing early- the earlier, the better.
- Find a wealth creation plan that works for your risk appetite, diversify your portfolio, and of course, monitor and rebalance it regularly.
Wealth creation is an arguably controversial topic, with countless people promising “financial freedom” through get-rich-quick ideas that eventually turn out to be Ponzi schemes. But we also know that wealth creation is an important aspect of futureproofing. And who better to plan for your future than yourself?
So how do you build wealth to secure your future without falling for these schemes? That’s what we’re here to help you with.
Keep reading to know how you can rest assured knowing your financial freedom is in the safest hands– yours.
What Is Wealth Creation?
How do you define wealth? An abundance of money is the first thing that comes to mind, right? So wealth creation is the act of investing the money and compounding it to align with your financial goals.
Let’s face it– one cannot create wealth by just earning money and saving it. There are a lot of factors, one of them being inflation, that don’t allow this to be a feasible method of wealth creation. Investing your savings in financial assets that you believe in to create a parallel stream of income is the ideal way to build wealth.
Psst, there’s also the added benefit of your investments being safe from taxes.
What Is Wealth Creation Plan?
Now that you’ve understood what wealth creation is, how do you get around to actually doing it? That’s where wealth creation plans come into play. A wealth creation plan is an investment plan that you can use to grow your savings exponentially over time and build a healthy corpus.
Now, this wealth creation plan could be as simple as an investment instrument, or it could be an elaborate investment plan. So your wealth creation plan could involve creating your own plan to invest directly in stocks or bonds, or you could take the easier route and invest your money in one of the wealth creation plans available in India. Some of the popular ones are–
- Equity and hybrid mutual funds
- ELSS– Equity Linked Saving Schemes
- ULIPs– Unit Linked Insurance Plans
- NPS– New/National Pension Scheme
Importance of Wealth Creation
What do your long-term plans look like? Sun-bathing on a European beach? Moving into your own house? Buying a luxury car? It’s great that you’re dreaming big; what’s even better is undertaking financial planning so you can fulfill your dreams. This is where wealth creation comes in handy.
Below are the reasons why you should start seriously considering building your wealth.
1. Regular income
Investing in promising assets can give you a parallel source of income to complement your regular earnings– passive income, if you will. Most beginners prefer to invest in assets like stocks, bonds, and mutual funds. These investments can help you earn a secondary income through dividends and interest. Depending on your risk appetite, you can go with any of these options. Since we’re on the topic of regular income, check out Mudrex Vault. We offer up to 10% interest annually with no hidden fees or lock-in period. And the interest is credited automatically on a daily basis. Need I say more?
These investments could turn out to be great sources of passive income and help you build your savings, which eventually contribute to your retirement corpus. Apart from that, these funds could turn out to be a huge help in times of emergency, say a health crisis or any other unexpected expense.
2. Retirement planning
By the time you retire, you probably would’ve handled your fair share of stress, probably more. Let’s not kid ourselves– definitely more. Ideally, your retirement years should be happy and stress-free, not to forget healthy. This is when you’ll look back and realize the benefits of investing your money.
So, to live the post-retirement life you deserve, you should look to start investing early and regularly.
3. Goal-based investing
Planning your investments according to your goals, both short-term and long-term, is the easiest way to both achieve and measure success. Knowing your wants and needs allows you to frame your expected returns and, thus, invest accordingly. And achieving these goals means you’ve obviously had a successful investment.
To decide which investments are best suited to help you achieve your goals, DYOR– Do Your Own Research. But if you’re struggling to even get started, here are some tips that might help.
Simple Strategies for Short-Term and Long-Term Wealth Creation
Wealth creation takes planning. Here are a few simple strategies to help you get started on your journey to building wealth.
1. Frame your financial goals
To begin creating wealth, you need to first set down financial goals. These goals will, in turn, help you measure your success when it comes to your investments. But how do you go about framing your goals? Here are five simple rules that will come in handy.
Your financial goals need to be SMART:
The more specific your goals are, the easier they will be to work towards. For example, “I want to go on a four-day vacation to Norway to see the Northern Lights” is a more specific goal than “I want to go on a vacation.”
Now that you know what you want, you need to know how much it costs. There might be a lot of different packages for vacations to Norway. Your goal has to be measurable; for example, “I want to go on a four-day vacation to Norway that costs 4 lakh rupees.”
Your goal has to be proportionate to your income. For example, setting a goal like “I want to go on a world cruise” might be unrealistic at the beginning of your career. Your goals have to grow as your career progresses.
Your goals, if they are unrealistic, will only add to your stress and will take a lot longer to achieve than you envisioned. Keeping it realistic is the best course of action.
Keeping your goals time-bound is extremely important as this allows you to complete them and move on to the next thing. Of course, giving yourself reasonable time & being disciplined with financials to complete them is also crucial.
2. Start early
Even if you’re starting small, compound interest has a snowball effect, allowing your initial investment to grow significantly over time. So the earlier you start, the better. Seeing your investment grow inculcates a habit of investing regularly, which only translates to higher returns.
3. Find a plan that aligns with your goals
Higher gain implies higher risk. So it’s probably safer to go with modern investment plans, which are low-risk, long-term options. But don’t let us decide for you; see what works for you after doing your own research.
4. Find the balance for asset allocation
Investing in only one asset class can limit the liquidity of your portfolio. So it’s advisable to invest in varied assets to limit risk as well as ensure liquidity. If it’s your crypto portfolio that you’re looking to diversify, look no further than Mudrex Coin Sets.
5. Monitor your financial assets regularly
Investing is not the last step of wealth creation. Taking the time to monitor and adjust your portfolio is really important. Make sure to balance for maximum yield while optimizing for an acceptable level of risk.
Dos and Don’ts of Long-Term Wealth Creation Process
Long-term wealth creation is a patient man’s game. There are a few important dos and don’ts to keep in mind while getting into the long-term game.
- Have SMART goals
- Start investing early
- Diversify your portfolio to hold multiple asset classes
- Monitor your portfolio and adjust it when necessary
- Optimize your portfolio for maximum yield with an acceptable level of risk
- Don’t hold all your money in a savings account
- Do not invest without keeping aside enough for your emergency fund
- Don’t invest in only one asset class
- Don’t invest without doing your own research
Wealth creation is necessary to secure your future and achieve your financial goals. Keep in mind that it is a long-term process, and it will be slow. There are a lot of investment opportunities on the market, and it is necessary to find ones that align with your goals and work for your risk appetite. And don’t forget to keep a diversified portfolio.
1. What are examples of wealth creation?
Stocks/equities are the most reliable asset classes when it comes to long-term wealth building. Historically, stocks have performed well in markets all over the world to give investors consistent returns on their investments. Other reliable asset classes include bonds and debt instruments.
2. What is the fastest way to create wealth?
Investing in high-return assets is the fastest way to create wealth. But keep in mind that high-return investments are high-risk ones. Make sure to only invest what you can afford to lose and optimize for an acceptable level of risk. And as always, DYOR- do your own research!
3. What are the types of wealth?
Wealth can be classified into four categories:
- Financial wealth– money
- Social wealth– status
- Time wealth– freedom
- Physical wealth– health
Financial freedom makes a person wealthy across all four categories. This can mean different things for different people, but essentially, it is the state of having enough money to spend the rest of your life without having to work. Financial freedom would obviously boost your status, give you more time for yourself, and allows you to give yourself the best resources available to safeguard your health.