In a world of uncertainty where everything is unpredictable, you must be prepared to face any challenge. Financial stability is crucial for addressing various challenges, whether they are related to finances, health, or business. To achieve financial stability, one can build assets that generate income and create wealth across different asset classes.
“Top Investment Vehicles to Build Assets and Grow Wealth”
Why Relying Solely on a Job Makes Wealth Creation Challenging
When it comes to building wealth, a job often proves to be the slowest vehicle for most people. This is because employment typically limits your ability to directly influence your intrinsic value—the worth of your time as measured by your hourly, minute-by-minute, or even second-by-second earnings. This constraint is particularly evident for professions outside high-paying fields like acting, elite sports, or other prestigious careers.
What Is Intrinsic Value?
Intrinsic value represents the rate at which your employer compensates you for your time. For example, if you earn ₹24 LPA (lakh per annum) while working 8 hours a day, your breakdown looks like this:
- ₹2,00,000 per month
- ₹6,600 per day
- ₹825 per hour
- ₹13.75 per minute
- ₹0.22 per second
Your intrinsic value, in this case, is ₹13.75 per minute or ₹0.22 per second.
Why Wealth Creation Through a Job Is Limited
Now, let’s consider what it would take to earn ₹1 crore per year. To achieve this, your income would need to be:
- ₹8.4 lakhs per month
- ₹28,000 per day
- ₹3,500 per hour
- ₹58.3 per minute
- ₹0.97 per second
Achieving such an exponential increase in income is difficult through a conventional job unless you’re in an exceptionally high-paying profession. This highlights why relying solely on a job for wealth creation is challenging.
What’s the Solution?
To build real wealth and achieve financial independence, you need to explore other vehicles beyond a job. Investing in assets, building passive income streams, and leveraging opportunities in various asset classes can help you break free from the constraints of intrinsic value and accelerate your journey to financial freedom.
Real Estate: A High-Growth Investment Vehicle with Considerations
Real estate is often considered a high-growth investment compared to a traditional job, offering the potential for significant returns over time. However, it comes with certain challenges, such as the need for substantial upfront capital and ongoing maintenance costs, which may limit its accessibility for some investors. Furthermore, real estate investments are relatively illiquid, meaning they cannot easily be converted into cash when needed. While real estate can be a powerful tool for wealth building, it’s important to carefully consider these factors and ensure you’re financially prepared for the commitments involved.
Financial Markets: A Fast-Track to Wealth Creation with Expert Guidance
When compared to more traditional wealth-building methods, financial markets can be viewed as a faster track to wealth creation. However, the key challenge lies in the necessity of acquiring the right knowledge and expertise to make informed investment decisions. Navigating financial markets effectively requires understanding complex factors, such as market trends, risk management, and portfolio diversification. Without this expertise, it can be difficult to maximize returns or avoid significant losses.
The advantage of investing in financial markets is that there are alternative options for those who may not have the necessary expertise. One such option is investing in mutual funds, where your money is managed by professional fund managers who make decisions based on market analysis. Alternatively, you can hire a financial expert or advisor to manage your investments on your behalf, ensuring that your strategy aligns with your financial goals.
Business: The Fast-Track to Wealth Creation
Among the various avenues for wealth creation, owning and running a business stands out as the fastest path. Unlike traditional employment, where intrinsic value—your worth per hour or minute—is relatively fixed, a business allows for more control and influence over profitability. The core reason for this is that businesses generate revenue based on the volume of products or services sold, which directly affects their profit line. This dynamic offers the potential for substantial growth and wealth creation, especially as sales increase and efficiencies improve.
For instance, consider the case of Maruti Suzuki, one of the leading automobile manufacturers in India. In 2022, Maruti Suzuki sold 19.66 lakh units, and in 2023, they saw a remarkable increase, selling 21.35 lakh units—a jump of 1.69 lakh units in just one financial year. This increase in sales not only demonstrates how businesses can influence intrinsic value, but it also led to a significant rise in profits. As sales grew, Maruti Suzuki’s profit after tax surged from ₹8,000 crore to ₹13,000 crore, highlighting the direct link between scaling business operations and increasing wealth.
Conclusion:
While employment can provide a steady income, it is often challenging to influence intrinsic value solely through a job. As a result, many individuals turn to other wealth-building vehicles, such as real estate, financial markets, and various investments, to supplement their earnings. A business, however, offers a more dynamic and scalable way to create wealth. By influencing the number of units sold, increasing revenue, and maximizing profit margins, business owners have the potential to achieve substantial financial growth.