prasad1
Active member
Human Beings learn critical life lessons in two ways Instructional way and Experiential way. Lessons that humans learn from others experience are easy lessons … for example we all were taught in the childhood that fire can burn our skin. We did not have to experience it to learn it. But there are lessons that are unfortunately not taught to most of us and hence are learnt hard way. Financial lessons are mostly learned the hard way as our formal education system barely touches them. It is for this reason that a lot of basic financial lessons, like the power of compounding or real returns are not known to masses during their active working life. These lessons are learnt after paying a huge cost in real life and most times at an advanced age.
I also learnt a few financial lessons during my 25 years of working life the hard way. One pays a heavy price for each of the lessons. In order to share these lessons to the younger generation, I share here the Myths about Wealth Creation that were there in my mind early in my career and got busted over the years.
Creating wealth in long term to achieve financial freedom is a goal for many of us. It’s like diligently investing in yourself, education and knowledge, learning the basics, understanding risk and reward, taking appropriate risk where required.
But people generally have misconceptions which pull them back from building wealth and eventually puts a full stop to their financial independence.
Myth – People who earn more are rich.
One of the biggest myths that becomes a hurdle in the journey of wealth creation. My grandfather taught me at a young age a lesson that I believe should be imbibed into every youngster.
Its not what you eat, but what you digest that makes you Healthy
Its not what you read, but what you absorb that makes you Wise
Its not what you Earn but what you save (and judiciously invest) that makes you Wealthy
Saving is the first step in the journey to Wealth Creation. Someone who earns 10 lakhs a month may not progress on the path to Wealth Creation if he doesn’t save any money while his driver who earns 30 thousand a month may be able to create Wealth, if he diligently saves a part of his earnings and invests judiciously.
The value of this lesson – Spend less than what you earn - is immense if someone learns this at a young age.
Myth – Investment requires a lot of money
Many people think they need to wait until they have accumulated a large sum of money to be able to invest but honestly, that’s just a limiting belief. The fact is you can start investing in mutual funds with a sum as less as ₹500 per month. Choose a fund that fits your risk profile perfectly or take a help from an advisor to start your journey of wealth creation.
Myth - We know all wonders of the World
We were taught about 7 wonders of the world in our school. But no one taught us what Albert Einstein called the 8 the wonder of world – Magic of Compounding. He said “Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”
Compounding essentially works on 2 principles:
Reinvestment of earnings
Time
The concept is based on time value of money, which means the value of money changes depending upon when it is received.
You do not need a large investible corpus to create wealth, the power of systematic investment is unlocked through compounding and the key to its success is discipline.
The two most critical aspect of Magic of Compounding is Return and Time. The true magic can not be witnessed in the absence of any one of them. Regular reploughing the return earned over a long period of time can create Wealth that is unbelievable to most
by
Deepak Mehta
Head – SIP, National Distributors and Retail Banks
UTI Mutual Fund
timesofindia.indiatimes.com
Please note that The article is biased and one-sided.
I also learnt a few financial lessons during my 25 years of working life the hard way. One pays a heavy price for each of the lessons. In order to share these lessons to the younger generation, I share here the Myths about Wealth Creation that were there in my mind early in my career and got busted over the years.
Creating wealth in long term to achieve financial freedom is a goal for many of us. It’s like diligently investing in yourself, education and knowledge, learning the basics, understanding risk and reward, taking appropriate risk where required.
But people generally have misconceptions which pull them back from building wealth and eventually puts a full stop to their financial independence.
Myth – People who earn more are rich.
One of the biggest myths that becomes a hurdle in the journey of wealth creation. My grandfather taught me at a young age a lesson that I believe should be imbibed into every youngster.
Its not what you eat, but what you digest that makes you Healthy
Its not what you read, but what you absorb that makes you Wise
Its not what you Earn but what you save (and judiciously invest) that makes you Wealthy
Saving is the first step in the journey to Wealth Creation. Someone who earns 10 lakhs a month may not progress on the path to Wealth Creation if he doesn’t save any money while his driver who earns 30 thousand a month may be able to create Wealth, if he diligently saves a part of his earnings and invests judiciously.
The value of this lesson – Spend less than what you earn - is immense if someone learns this at a young age.
Myth – Investment requires a lot of money
Many people think they need to wait until they have accumulated a large sum of money to be able to invest but honestly, that’s just a limiting belief. The fact is you can start investing in mutual funds with a sum as less as ₹500 per month. Choose a fund that fits your risk profile perfectly or take a help from an advisor to start your journey of wealth creation.
Myth - We know all wonders of the World
We were taught about 7 wonders of the world in our school. But no one taught us what Albert Einstein called the 8 the wonder of world – Magic of Compounding. He said “Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”
Compounding essentially works on 2 principles:
Reinvestment of earnings
Time
The concept is based on time value of money, which means the value of money changes depending upon when it is received.
You do not need a large investible corpus to create wealth, the power of systematic investment is unlocked through compounding and the key to its success is discipline.
The two most critical aspect of Magic of Compounding is Return and Time. The true magic can not be witnessed in the absence of any one of them. Regular reploughing the return earned over a long period of time can create Wealth that is unbelievable to most
by
Deepak Mehta
Head – SIP, National Distributors and Retail Banks
UTI Mutual Fund
Myths About Wealth Creation - Times of India
India Business News: 78212148 Human Beings learn critical life lessons in two ways Instructional way and Experiential way.
timesofindia.indiatimes.com
Please note that The article is biased and one-sided.
