Investing possesses the power to provide you with inflation-beating returns and will enable you to harness the benefits of the loop of wealth creation.
Investments: Do You Really Need It?
When I was a kid, my dad used to explain to me how necessary it was to build a house with several pillars or columns. This was a vital element of any structure which could help the house sustain all catastrophes. But do we construct a house with just one pillar? How much load can that one pillar take? What will happen if it is not able to survive an earthquake?
While planning to buy or construct a house, we analyse everything in detail—the size of the columns, their distancing and alignment and so forth. Similarly, why should you not analyse your current financial situation in detail? Just as you cannot make a strong and durable house based on just one pillar, you can’t rely on just one source of income to help you sail through life.
Having a secured job is financial security, but having a recurring source of income through non -formal sources, enough to meet your monthly expenditures, is financial independence. Working forty to forty-five hours a week to earn your income isn’t as interesting as sleeping comfortably in your bed and receiving money in your bank account. Yes, this is possible. You just have to put your money to the right use.
Remember the Loop of Wealth Creation?
To enter in this loop, the condition was to channelise savings in a way such that it increases your True Assets, which in turn raises your Personal Capital. This channelising of savings is nothing but investment. Your Personal Capital is something that works for you and earns money for you. An increase in your Personal Capital opens doors to new streams of income which, in turn, increase your savings. To harness the power of this loop of wealth creation, the only thing you need to do is invest your money in buying True Assets. If you are able to create a considerable amount of Personal Capital, you wouldn’t have to worry about fuelling the loop after retirement, as after some time, it takes care of itself.
Many people misunderstand investing as a mere tool to save taxes. A life insurance policy or contribution to your PF account will definitely help you save some taxes. But saving taxes should not be the sole criteria for an investment decision. The overall returns, in line with your objectives, should direct your decision-making
And saving tax is not enough. Investing possesses the power to provide you with inflation-beating returns and will enable you to harness the benefits of the loop of wealth creation. Your investment in True Assets will ensure that you meet all your goals at the right time. You should start focusing on investing proactively by buying True Assets. Otherwise, all your efforts will result in just trying to beat inflation, and not creating wealth, or enhancing your Personal Capital.
--Excerpted with permission from Mint Your Money by Pranjal Kamra, published by Westland Publications.