In simple words, wealth creation refers to the process of accumulating money or savings and investing it to create a parallel source of income. By investing in financial products for a long time, you obtain higher returns. In order to reach all of your long-term financial goals, including your dream home, your child's education and much more, wealth creation becomes a crucial component of your financial journey.
It is a positive sign that people are inclined towards saving, budgeting and ultimately investing their savings in various avenues. This helps in wealth creation and bridges the gap between your present financial position and living your dream life.
Wealth creation helps people in attaining Financial Freedom and Financial Independence. It makes your financial future secure and enables you to accumulate a corpus. Also, when you choose the mode of investments to create wealth, you set aside a sum on a regular basis, which helps you in being a disciplined investor while also generating wealth for your retirement and future goals.
Through this blog, we are going to discuss how investments are an ideal way to create wealth and generate returns over the years.
Investments - The Bridge to Wealth Creation
We all have financial goals which we wish to attain before we reach a certain age. For example- collecting enough corpus for retirement, fulfilling our travel goals, buying a luxurious house, enabling our children to study in the best universities and many more. But have you ever wondered how people attain these goals? The answer to this is Investing.
Investing is an ideal approach to put your money to work for you and create wealth. Your money will grow in value and outpace inflation if you make wise investment decisions. This is due to the power of compounding and the trade-off between risk and return which creates a higher growth potential.
Most people have realised the fact that instead of holding cash or keeping it in their savings account, it is better to invest money in avenues that create wealth. Investing your money allows it to grow over time due to the power of compounding and ensures long-term growth.
For instance, investing in stocks could help in generating profits. On the other hand, keeping your money in savings account probably won't offer the same return potential. So, if wealth creation is on your mind- investing is the way!
How investing through various asset classes helps?
To understand, how one can invest in various asset classes and avail advantages, it is essential to understand the actual meaning of asset classes. There are several investing options available to assist you invest your money and get the best returns to create wealth. These are generally grouped as asset classes, including cash and cash equivalents, bonds, derivatives, equities, real estate, gold, commodities, and alternative investments among others.
Let us discuss some of the most popular asset classes-
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Equity Asset Class
Companies issue shares of ownership known as equity or stock. Equity asset class include Small-cap funds, mid-cap funds, large-cap funds, large and mid-cap funds, multi-cap funds, dividend yield funds, thematic funds, contra funds, value funds, targeted funds, sectoral funds, and equity-linked savings schemes (ELSS), among other subcategories.
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Fixed-Income Asset Class
Fixed-Income asset class is one of the oldest forms of investing. Government and corporate bonds, corporate debt securities, money market instruments, etc. are all included under this class. Fixed-Income asset class frequently invest in debt instruments that aim to provide investors with interest payments up until maturity.
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Cash and Cash Equivalent Asset Class
Short-term investing is best suited for cash and cash equivalents. The major advantage associated with such investments is their liquidity. Treasury bills, commercial papers, and other highly liquid products having maturities up to one year are examples of cash equivalents. As a result, cash and cash equivalent investments are conveniently accessible.
Hence, it is advisable to diversify your portfolio across various asset classes to reap the benefits of compounding. Also, it is beneficial to start investing as soon as you can, and set up your dividends and other income to be reinvested automatically so that you can maximise your wealth in the long run.
Investments and Power of Compounding
Creating wealth by investing is a proper approach owing to power of compounding. However, it is pertinent to note that compounding works best when you hold onto your investments for a longer period of time. Therefore, if you are serious about building wealth, start saving and investing as much as you can so that your wealth creation process becomes easy.
Compounding occurs when your investments produce income from income that has already been generated. When dividend or earnings from an investment are reinvested, compounding takes place. These profits or dividends then produce more profits. For example, if you invest in a stock that pays dividends, you could think about reinvesting the dividends to maximise the potential power of compounding.
Conclusion
If you are an aspiring investor, we, at mastertrust are here to help you in your wealth creation journey. We understand your life goals and help you in creating tailor-made portfolios that help you in attaining your goals. We provide hassle-free services to our investors.
Thus, if you are looking to invest in any form of investment avenue like direct equity, mutual funds, bonds, ETFs or commodities, mastertrust is here to help you. Whether you are new to investing or an experienced investor, we help you in making the right investment choice so that your wealth creation process becomes a simple affair.
Investments are the present and future of wealth creation and thus, no one should dread investments. Individuals who planned their investment strategy in early-stages of their life have emerged to create a huge corpus for themselves and their family and have been able to retire early. It is historically proven that investments are a great inflation-beating mode of wealth creation.
Master the art of Investments with mastertrust. Connect with us today.