Ten Commandments of Wealth Creation

01) Start Early, Start SIPs — Compound interest is akin to a tiny snowball gaining momentum as it rolls downhill – the farther it goes, the more it grows. At the age of 25, if you start investing ₹10,000 monthly, increasing the investment amount by 20 per cent yearly and assuming a long-term return at 12 per cent per annum, you will retire at 60 with a corpus of ₹91.96 crore. If the same exercise is started at the age of 40, you will retire with just ₹4.8 crore! As Albert Einstein famously remarked, “Compound interest is the eighth wonder of the world. He who understands it earns it and he who doesn’t pays it.” 

02) Live Within your Means — Spending more than what you earn is a common trait among individuals in all income groups. We assume somebody who drives an expensive car or lives in a luxurious house must be financially sound. That is not always true. Some of them may simply be living beyond their means. At all times, strive to avoid credit card debt. Do as Thomas Jefferson advised, “Do not save what is left after spending, but spend what is left after saving.” 

03) Seek Professional Advice — Do you visit a dentist for legal advice or a plumber for heart surgery? Certainly not! Then why not seek professional advice for your investments? When considering investment instruments, do not get swayed by the words of the salesperson. 

04) Don’t Speculate — Money is slippery and hard to keep. Investing your hard-earned cash into stocks you know nothing about is like playing financial roulette. Don’t roll the dice with your money—invest wisely! Even with complete due diligence, you will end up with some bad investments. The trick is to avoid significant losses. Avoid speculation. George Soros famously said, “It’s not whether you are right or wrong that’s important, but how much money you make when you are right and how much you lose when you are wrong." 

05) Follow a Sound Financial Plan — How can you ever reach a goal if you do not have one? Many investors lack a solid financial plan, resulting in a portfolio resembling a chaotic collage. Their investments are an assortment of offerings gathered throughout their financial journey. When it comes to investing, there is no room for ‘gut feelings’ as emotional investing is a recipe for failure. Benjamin Franklin warned, “If you fail to plan, you are planning to fail.” 

06) Be Patient — We live in a world where commonsense and patience are forgotten traits. Think of marathon runners, not necessarily the fastest or strongest. They have immense patience to wait for the perfect time to make that final burst of speed. To be a successful investor, you have to be patient. Investment decisions are frequently clouded by panic and euphoria, leading to a disregard for common sense. Don’t forget the old saying, “Time in the market is more important than timing the market.” 

07) Don’t Panic. Don’t be Greedy Either — Bull markets brush negative news under the carpet just as positive news is greeted with scepticism in a bear market. Stock markets cannot go up or down forever. Greed and fear are two emotions that we must control to be a successful investor. Remember Warren Buffett’s famous advice, “Be fearful when others are greedy and greedy when others are fearful.” 

08) Create a Contingency Fund — No one is ever warned of an impending setback such as an accident, a medical emergency, a business downturn, or a job loss. Create an emergency fund to cover your living expenses for at least six months to tide over challenging times. 

09) Have Adequate Insurance — Medical expenses often drain retirees’ savings. It is important to be prepared for risks by being adequately insured when it comes to your possessions, life, health and finances. Insurance is the safety net we all need, but we hope we never have to use it. 

10) Plan your Estate — Inheritance disputes are rampant due to the lack of precise estate planning. They lead to lengthy legal battles, strained relationships, and financial losses. Establish a legally valid Will or Trust to outline your wishes and minimise ambiguity to avoid future turmoil. This fosters family harmony and prevents costly disputes. 


Shibu Das
Director, Goldstar Financial Services Private Limited

The writer is Director, Goldstar Financial Services Private Limited
■ Email : shibu@fineadvice.in / shibu@goldstarindia.com ■ website : www.goldstarindia.com