4 Common Myths About Wealth Creation

4 Common Myths About Wealth Creation

By Akhil Chugh

Creating wealth in the long term to achieve financial freedom and security is a goal for most of the people.  There are many alternative ways to get there — savings, investments, passive income, etc. But the most important ingredient in wealth creation is patience and careful planning.

Creating wealth is the process of earning consistent returns, it is about maintaining the right investment behaviour and staying on course and true to your asset allocation.

There are also many myths about wealth that colour the perceptions of those who wish to attain it. Let’s discuss top 4 myths that can change your approach to wealth creation:

Myths about wealth creation

1. Saving is enough to become wealthy:

Some people think that saving enough amount of money will make them wealthy. While saving is important, saving alone cannot make you rich. The only way to be truly rich is when you can make your money work for you. Making money work for you means putting your money to such use where it keeps multiplying without you being directly involved. It is imperative to understand that saving in itself would not have any value unless and until it is invested in return generating assets like Mutual Funds.

2. Large amount is needed to make investments:

Many people think that large sum of money is required to start their investment journey. However, the fact is that you can start investing with amount as less as Rs 500 monthly SIPs. Start by choosing a fund based on your risk profile and investment objective and enjoy the benefits of compounding in coming years. In later years, SIPs can be topped up with increasing income to generate higher returns.

Even monthly SIP of Rs 10000/month for 25 years, assuming 12% rate of return annually, can lead to the huge corpus of Rs 1,68,62,065. This is the magic of compounding.

In case of any query, take a help from your financial consultant to start your journey of wealth creation.

3. Retirement planning is for old:

It is common belief among all youngsters that retirement planning is only for old. This is one of the myth with far reaching consequences as early start can make a huge impact on the total retirement corpus in the future.

Through the power of compounding, a SIP helps your money to earn interest which is added back to your principal to earn more interest over time. So the longer you stay invested, the more time your money gets to grow.

Consider an example, there are two friends – Suraj and Dheeraj. Suraj starts investing Rs 10000 per month in a mutual fund at the age of 25 years and Dheeraj starts investing the same amount at the age of 30 years in the same mutual fund till the age 60. Assuming they got an average rate of 12% each year, Suraj’s accumulated corpus at the age of 60 will be Rs 5,45,90,315 and Dheeraj’s accumulated corpus would be Rs 3,05,20,133. So by starting 5 years early, Suraj will get Rs 2,40,70,182 more than Dheeraj! This clearly shows how an early start can increase your total corpus manifold, enabling you to fulfil your financial goals.

4. Understanding market timing is very important:

With Sensex nearing 50,000 and NIFTY near 15,000 it might seem to new investors that market is overheated and they have missed the boat. However, timing doesn’t really matter if you start investing in mutual funds via SIPs for long term. By investing in Mutual Funds vis SIPs, you buy more when the markets are low and less when markets are high. Thus, averaging out your purchasing cost in the long run.

It is not possible to time the market even for market experts, so SIPs are a great way for new investors to start their investment journey and grow their wealth.

Invest & grow with SIPs!