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When we think of HNIs, we often think that their wealth is a result of inheritance, windfalls, or pure luck. While this may be true in some cases, it rarely tells us the whole story.
In reality, the rich are wealthy because they adopt wealth-creation strategies to continually grow their wealth. They don’t just sit with what they have; they look for ways to grow it exponentially.
Since the concept of wealth creation is so important, we cover it in detail in this article.
What is Wealth Creation?
Wealth creation is the process of gradually building your financial base over time. Typically, wealth creation involves:
- Saving money in a disciplined way
- Making strategic investments in assets like stocks, bonds, and MFs
- Giving your money time to grow
Simply put, wealth creation is how you turn your hard-earned money into assets that can, in turn, earn more money for you.
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What Are the Key Principles of Wealth Creation?
Before we highlight the various wealth creation strategies used by the rich, let’s first understand the core tenets that guide them:
Having a Long-Term Vision
For the rich, wealth creation strategies aren’t about what’s working now and short-term returns. Rather, it’s about what will work in the long-term. That’s why these strategies are focused on investments that may grow steadily over time.
A long-term horizon also gives compounding time to grow the invested sum as returns start earning returns.
Consistency
Wealth creation is all about making regular contributions and staying consistent. With a consistent and disciplined investment approach, you eliminate the need and urge to time the market and thereby avoid missed opportunities for wealth creation.
Risk Management
Wealth creation doesn’t mean taking on endless risks. In fact, people who are wealthy know that diversifying investments across assets can help protect their wealth from market downturns.
Tax Efficiency
When it comes to wealth creation, taxes cannot be ignored. A good wealth creation plan focuses on post-tax returns. Structuring investments to use tax benefits helps the wealthy spend less on taxes and keep more of the money invested and growing.
Wealth Creation Strategies Used By Rich People
Here’s how rich people put these wealth creation principles to use through strategic steps:
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Make Money Work For Them Through Strategic Investments
Wealthy people understand that wealth creation cannot happen simply by earning money and saving it. You need to make strategic investments to actually grow your wealth. That’s why they prioritise investing their money rather than keeping it in savings accounts.
What Can You Do?
- Don’t just keep your funds in the savings account. Consider investing in stocks, bonds, and other assets to earn better potential returns
- Set up auto-debit mandates so that you never miss a contribution.
- Try to increase your contributions as your income grows over the years.
- Begin investing as soon as possible. Starting early gives your contributions time to grow and compound.
- Monitor and rebalance your portfolio to keep your asset allocation suitable.
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Diversify for Risk Management
Rich people don’t put all their eggs in one basket. Instead, they use diversification to spread risk across different asset classes and reduce reliance on any single asset class. So even if one asset performs poorly, the overall impact on their portfolio isn’t very significant.
What Can You Do?
- You may spread your investments across equity stocks, highly-rated company bonds, FDs, real estate, mutual funds, and other assets.
- You may consider assets that have a low correlation with each other to manage swings (such as gold and stocks).
- Consider a goal-based investing approach and review your risk appetite and time horizon before deciding which assets to invest in and how much to invest.
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Protect Wealth Through Tax Planning
Focusing only on how much you earn from investments isn’t enough. Rich people understand that post-tax returns matter just as much. That’s why they work with financial advisers and tax planners to optimise their tax liabilities, claim all deductions, and make sure their money keeps growing.
What Can You Do?
- You may invest in instruments like ELSS funds, tax-saving FDs, and PPF to claim a deduction of up to Rs. 1.5 lakhs u/s 80(C) under the old tax regime.
- You may consider NPS that offers an additional Rs. 50,000 deduction u/s 80CCD(1B).
- Stay invested in equity funds and stocks for the long term, especially if you fall in a higher tax bracket
- Time capital gains and losses to strategically harvest tax losses.
Examples of Wealth Building Investments
Here’s a list of common wealth-building investments used by the rich:
Bonds and Fixed-Income Instruments
Investors who have a low risk tolerance but still wish to grow their wealth can consider bonds and other fixed-income assets like FDs. Here’s what this includes:
- Government bonds: Issued by the Indian government, government bonds carry sovereign backing and are therefore safer. You can find fixed, floating, and zero-coupon rate bonds with maturities ranging from 5 to 40 years.
- Corporate Bonds: Corporate bonds are issued by companies to raise capital. They typically offer fixed interest payments, and the principal is returned at maturity. While corporate bonds may be riskier than G-secs, they carry credit ratings by CRISIL and other agencies that help determine their creditworthiness.
- Fixed Deposits: Both banks and NBFCs offer FDs that provide modest capital growth through compounding. NBFC FD interest rates tend to be higher, so growth potential can be better. But these FDs may also be riskier as they are not covered by the DICGC insurance cover that is present for bank FDs.
Equities
Equities are a preferred vehicle of wealth creation for those who can take on more risk. Investing in established and growing companies may help generate substantial returns over time, but there’s also a greater risk of market volatility.
If your risk appetite and return expectation align with equities, you can invest in them through:
- Direct stock investments
- Equity-oriented mutual funds
Gold and Precious Metals
Commodities have always been a trusted investment option for wealth creation among the rich. Gold, silver, and other precious metals may act as a hedge against inflation and economic uncertainty. Since these assets have low correlation with the stock market, they may protect your wealth during market downturns.
You can invest in precious metals in a number of ways, including:
- ETFs
- Fund of funds
- Direct purchase of bullions
- Futures contracts
Real Estate
For the rich, real estate has always remained a proven wealth-building tool. Investments in real estate can yield both capital appreciation over time (as property values rise) and rental income.
There are two popular ways of investing in real estate:
- Directly buying residential or commercial property
- Investing through ReITs
Grow Your Wealth With Smart Investments
In summary, wealth creation for the rich means:
- Investing it strategically in different assets with a long-term view
- Managing risk through diversification
- Building tax efficiency to keep more money invested and growing
You can also follow these core tenets to grow your wealth over time with suitable investment options.
If you are a low-risk investor looking for wealth-creation options or just someone looking to diversify, you can visit the GoldenPi platform and check out the different fixed-income options. Here, you’ll find a wide collection of bonds, NDCs, and FDs that can help you grow your portfolio in a risk-balanced way.
Wealth Creation FAQs
1. What is the role of diversification in wealth creation?
Diversification plays an important role in spreading risk across different asset classes. This helps reduce the impact of any single asset’s poor performance on your portfolio.
2. How much should I invest in 2026 to create wealth?
That depends on your financial goals, income, and expenses. A good way to determine how much you can invest is to start budgeting. This way, you can see exactly how much you can set aside every month for investing.
3. Is wealth creation possible if I have a low income?
Yes, absolutely! It doesn’t matter if you have a low income currently. Wealth creation works well with consistent and regular investing. So, even if you start small and stay consistent, your corpus can grow through compounding, provided you stay invested for a long time.
Disclaimer:
This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.
Bonds or non-convertible debentures (NCDs) are regulated by the Securities and Exchange Board of India and other government authorities. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.
