The Basics again… What are Assets / Liabilities for Personal Wealth Creation? One that gives a POSITIVE CASH FLOW IS AN ASSET Others are Liabilities / Expenses.
What is growth / return? Time Value for Money Relative Growth Nominal Interest Rate Vs EffectiveInterest Rate
What is Risk? Actual Returns Vs Expected returns
What is Wealth?
Take 2 minutes. Close your eyes and imagine a wealthy person. Write what you see.
A person's wealth is defined by how long a period of time he/she can sustain their lifestyle if they stop working.
The longer you can go on living your life without working another day, the richer you actually are.
Your wealth is therefore defined by three things Your monthly expenses, Your liquid assets and Your passive income.
The Mantra TIME Start early Use the power of compounding
Where do I Invest? EQUITY Current Yield – Low Capital Appreciation – High Typical Returns - 19.25% as per SENSEX returns since 1979 Risk – High Marketability / Liquidity – High Tax Treatment - No long term capital gains tax after 365 days. Dividends received are tax free Convenience - High
Where do I Invest? BANK DEPOSITS Current Yield – Moderate Capital Appreciation – Nil Typical Returns - 8% Average Risk – Negligible Marketability / Liquidity – High Tax Treatment - Section 80C benefits for 5 year deposit. All interests are taxable Convenience - Very High
Where do I Invest? MUTUAL FUND - EQUITY Current Yield – Low Capital Appreciation – High Typical Returns - 39% Average over 3yrs Highest return - 69% Risk – High Marketability / Liquidity – High Tax Treatment - Section 80C benefits for Equity Linked Savings Schemes. No long term capital gains tax after 365 days. No tax on dividends received. Convenience - Very High
If spending money brings you enjoyment, you will never be rich.However if making money brings you enjoyment, then your wealth isguaranteed.