How To Generate Wealth

Thumb Rules for Wealth Generation:

v  Avoid Debt

v  Save

v  Invest Wisely

v  Focus on Long Term Growth

 

Wealth generation is a slow boring process. It cannot be done overnight. It requires patience, discipline, and consistency over time.

Say you have an investment of 1,00,000 and your investment grows at a rate of 12% annually, then below is the growth chart.

 

Investment Growth @12% CAGR:

Year	Amount
1st	1,00,000
5th	1,76,234
10th	3,10,585
15th	5,47,357
20th	9,64,629
25th	17,00,006
30th	29,95,992

After 10 years you will notice the difference, By the end of

10 years, the amount is 3 times 3X,

15 years, the amount is 5 times 5X

20 years, the amount is 10 times 10X, (Wealth is now generated 10 times)

 

So the longer you are invested, the more the Wealth and after 20 years, it starts to grow exponentially.

if your CAGR is 15%, the amount will be even higher.

 

DEBT: Avoid until absolutely necessary.

 If you take a home loan of Rs 20,00,000 for a period of 20 years, @8.75% interest rate at a monthly EMI of 17,674. You end up paying a total amount of Rs 42,41,760. The bank is even smarter, in the initial years, maximum deduction will be of interest and little change in the principal amount. So, if you go to close the loan early, you still have to pay a large principal amount. The bank wants you to pay the loan on 20 years and not early closures. See..

SAVE: Develop a habit of saving money. This saving will go a long way into wealth generation

INVEST Wisely. The different type of investments are covered widely in this website.

Focus on Long-Term Growth

Regularly review your portfolios