3 Simple Steps to Become Rich

Here r the 3 basic steps of Wealth Building.
Hope u will like it..
Follow these simple steps for building a Wealth. No Complex theories or Investment Strategies required...
these steps follow KISS formula.... well it means.... "KEEP IT SIMPLE STUPID".....!!!!!
HAHAHAH..... just kidding.....

1. Pay Off all the Debt and Stay away from New Debt -

this is the first important step in starting a wealth building. u have to first pay off all the debts before starting a serious wealth building, (All means all Except Home Loan), Credit Card Debt is the worst one. so first of all payy off all the credit card bills. after that comes other loans like Car loans, vehical loans, personal loans, shopping EMIs or any other kind of debts. Paying off debt is an Investment. no need to pay off whole the home loan before starting wealth building. ...y? that we will discuss in some other article. so first pay off all of your debts. No matter how many years it will take... but this is important. may b it will take 3 years or 5 years or may b more.... but don't worry..... paying off all the debt is necessary and proven very effective scientifically and mathematically..... Don't think that my Car loan is due for next 3 years and it will give me a Tax benefits for Debt.... if u can pay off your Car loan within a year don't wait for 3 years u fool...!!!

Stop Borrowing Money NOW.....!!!! yeh.... this is very true... take a Scissor and cut down all of your credit cards. Don't pamper yourself by saying that Credit card is for emergency purpose. i will use it in Emergency.... For an Emergency u should have an Emergency Fund and not a Credit Card..... v will come to it later..... Replace your credit card with the debit card first. don't take any other loans. if buying a car is your necessity than also don't take loans but instead buy a 2-5 years old second hand car... but in no way.... borrow the new money.....!!!!!

2. Build an Emergency Fund before doing Investment -

After paying all of your debt.... the second step is to build an Emergency Fund. Emergency fund MUST have Minimun 3 to 6 months of your monthly expense. so in case of your disability or Hospitalisation until you claim your medical insurance policy.... your family's day to day expense meet... if your monthly expense is Rs. 1 lac than your emergency fund must have atleast 3 to 6 lacs before u start investing..

Remember, Emergency Fund is for Emergency....... u want to arrange a drinks party for your birthday and u dont have a single rupee in your pocket..... this is not an Emergency....!!!! Understand?....

3. Invest For Long Term ( means more than 10 years ) -

Once u pay off all your debts (Step 1) and build an Emergency Fund (Step 2) than and only do this step.... Don't try to b oversmart.... Don't jump directly to this step.... otherwise what will happen?... u have to liquidate your investments in emergency to pay off your debts and for day to day expenses...

Start Investing in Well-diversified, Equity Mutual Funds with past record of atleast 5 years via SIP. Don't see market ups and downs daily. u will gain nothing except stress. Park your money here for long-term means for 10-15 years or may b even more.... Equity has given highest return over every other Asset Class in the long-run in last centuary. so it is better that u invest your money in equity funds if u don't need it for atleast next 5 years.....

if u have invested Rs. 2 lac Lump-sum in equity before 20 years than in last 20 years Indian stock market has given more than 20% compounded annual return. so today its value was more than Rs. 75 Lacs. this is the power of Equity and power of compounding.... so Invest for long term...

A complete Analysis of Recession

 
Conversation between me and my friend Last week,

My Friend : " Hey, Baskar... What do u think about US Economic Slowdown?... Is it a Recession?.."
Me: " Well, yes this is clearly a recession. Fed Govt. will declare recession soon. But y r u asking so?.."

Friend: "Well... i just wanted to know that shold i exit from my current investments? bcoz my stock broker says Market is going to b very volatile for next year."
Me: " Well... it depends on your Goals. do u want money now?... r u near your goal?..."

Friend: " well... no... i don't have any goal. i don't understand what u want to say?"
ME: " well... if u don't have any goal or Time horizon than y do u invest in equities?"

Friend: "bcoz my broker says that equities give u high return. but now i m confused and panic bcoz of this recession in the USA that is affecting Asian markets..."
ME: "well... u have invested in good equity diversified mutual funds having a past record of minimum 5 years via SIP. so i don't think u should worry....."

Friend: " well...these r the advises during bull market.... what about recession?....what r the principles of Wealth building in recession?"
ME: " Ohh My God.... so u think that this is recession so principles of Wealth building will b un-effective?.... and now u want new principals of Wealth Building only bcoz this is a Recession..?"

Friend : "Yes"....

This is the problem with so many people... their stock brokers, relatives, friends and colleagues say them that this is a Recession so don't invest anywhere now, bcoz the prizes of the property will go down. the stock market will crash. the value of your investment will b down... so don't invest during the period of recession....

welll.....welllll....wellll......These r the rumors, Myths, Hype and Layman's talk..... this is not the advise or any scientifically proven fact that don't invest during recession.....

So What is Recession?...

see the graph.... well... according to graph Recession is a normal thing for any Business Cycle....
Whaaaaatttttt???????..........R U Kidding?........Recession is normal?...???... - U will ask...
Yes.... Recession is a Part of Normal Business Cycle..... See the graph again.....

what actually it is?.... well recession occurs " WHEN FOR 2 CONSECUTIVE QUARTERS GDP OF ANY COUNTRY GOES NEGATIVE"
GDP - means Gross Domestic Product (briefly speaking indicator of a financial health of country)

in every healthy business cycle recession comes every 20-30 years. A recession generally lasts for 6 to 18 months. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money. average recession lasts for 11 month.. The largest recession was THE GREAT DEPRESSION - 1929 in USA lasted for 43 months.

see the graph again.... TROUGH is The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion.
The 5 stages of the business cycle r ,

1) Growth (Expansion)
2)Peak
3)Recession (Contraction)
4)Trough
5)Recovery

At one time, business cycles were thought to be extremely regular, with predictable durations, but today they are widely believed to be irregular, varying in frequency, magnitude and duration.

again see the graph.... once recession and trough is over than during recovery phase first the graph will achieve previous peak and after that the previous peak is broken.... Understand?...
so after recession, the new growth will breal the previous peak......

So u will ask now.... we r not Economists or an Economic philosopher like u.....
so what is the need to know all these things to normal people?.....

MORAL -

1) Recession is a normal thing for a Business Cycle.... so its the Opportunity to buy Assets at low prize. its not Time to Exit but Its a Time to Enter at the lowest level.... u r so lucky that u have an Opportunity to invest in recession.. it means that there is a discount in the market and 100 Rs. product is selling at Rs. 50 only.

2) Principles of Wealth Building r the same and unchanged for the Recession.

3) If your Real Estate Broker says u that don't buy in Real Estate right now bcoz of Recession.... Don't listen to him.... this is an Opportunity to buy a cheap property.... and remember these types of opportunities come every 25-30 years or may b only once in a life.... so recession is not a something to beware about but its an Opportunity...

4) If your stock broker says that don't buy stocks bcoz market is volatile.... don't listen to him... just buy stocks of fundamentally strong companies as much as possible.. Its a discount in the market. Don't Discontinue your SIP of Equity Mutual Funds Instead Increase SIP amount if possible.... Its a SALE in the MArket that very few people get in their whole life.....

5) Don't listen to anyone.... just listen to your Brain.... Just think that if the company is really doing a genuine business and its stock is selling at discounted price than company's real valuation than i Must buy it......

Don't Beware of Recession.... BE Aggressive.... its nothing but a SALE in the Economy.... Buy items as much as possible at discounted price..... it is quiet possible that u don't get another discount (Recession) in your whole Life....!!!!!!!"

Easy way to become Billionaire

Its Really Easy and Quick to be Rich and Ultra-Rich in Information Age...

Founders of,

1) Microsoft.com

2) Amazon.com

3) Google.com

4) Facebook.com

5) Buy.com

6) E-Bay.com

and many more internet companies become billionaires in their early 30s.

Founder of Facebookf, Mark Zuckerberg becomes youngest, Self-made billionaire ever at the age of 23 years only....with Net Worth of US $ 1.5 Billion.

All bcoz of "Information Age".

Information Age started since late 1990.
Today is year 2008. In 18 years Information Age has changed the world.

I will explain u y its really easy to be rich in information Age...

Explanation - Y its easy to be Rich and Ultra-rich in information Age?...

See...actually before 1990, it was Industrial Age.

So u require 3 things to become succesful in Industrial age.(means before 1990)

1) Large Investment

2) Huge Infrastructure

3) Large Man Power

what was the draw back of Industrial Age?.....

Well... see to have all the 3 above thing was a difficult task.
Suppose u want to sell something than u need,

1) Huge Shopping mall

2) Huge Investment

3) Huge Manpower to maintain that infrastructure.

But after 1990. Information age comes,
so what happens?

u can SELL anything online.

Lets take an Example of "Amazon.com" -

What is Amazon.com?....Well...its an online shopping mall.

What can u buy from this store?...
Well....Anything..... books, jewellery, shoes, gadgets, PCs, laptops, mobiles and more and more and more.....

From where can u buy these things?....
Well....from Anywhere in the world.
u can order anything from this online store ...No matter wherever u r in the world. u can home deliver anything.

What is the Advantage of "Amazon.com"?

1) No Large Investments Required....bcoz this is an online store so v don't have to publish so many items.

2) No Large Infrastructure required. bcoz its an online store. so no need to invest in real estate and No need to open Franchisees. All u have to do is open a website and launch it....Thats it.....

3) Minimal Manpower is required to run and maintain the Infrastructure (Website) unlike Industrial Age. 
Amazon.com can be operated from a small room with few Computer Experts only. No need to higher expensive and high skilled sales and marketing executives. bcoz everything is online.

4) Customers can buy items from everywhere in the World.
Y?... bcoz the store is Online. so what happens?.... it doesn't require any franchisee or chain of shopping malls on different geographical locations.

5) Largest Customer Base - 
Online Business has the Largest customer base than Industrial age Business....

Y so?.... bcoz...... in online business.... Target Customer Group is from "World

While in Industrial age Businesses... Target Customers r from Local Geographical area only....


Industrial Age Businesses has so many limitations.

The main Limitation is "Limited Customers" 

While Information Age has "Infinitely High Customers" bcoz anyone from the World can Access that website.

Lets take the Example of this Blog....

This is "An Online University" for "Financial Literacy"....

if it was Industrial Age than i need Investment, Infrastructure and Manpower to open an University like this .
plus afterall doing all these my Customers will be limited to a particular Geograpraphical Area where i live....

But Fortunately, This is an "Information Age".
So what happens?....

I m from India. so if a person from California, London or Tokyo want to take True Education than he can take this Education Online without coming to My Geographical Location.

Plus The Advantage of Information Age is that, 

- I can accomodate as many students as possible in to my University...bcoz its Online....

- People who r seriously interested in Wealth Building Can learn from anywhere from the world. They just have to go woth Internet and That's it...they can access my Online University......

- Customer Base is high so i can generate CASHFLOW from my Online University by Displaying Google Adsense on its every page.

- People can come to my Online University anytime when they r free. No need to compromise with other things to take Education from My University....

- In future, i can offer Online Courses on "Financial Literacy" also and SELL it to people around the world. and for that i don't need huge infrastructure or man power like Physical Universities.....


So This is all about Information Age....
In Next Generation......The Day will come when Students don't need to go to Physical Universities.... Everything will be Online.......

Students can take Govt. Authorised Online Degrees......

So "Creat your own Online Business and Get Rich Quick"......!!!!! 

Buy a 2nd Hand Car

Do u love Cars?
i also love Car.....

we all love expensive Cars.

Here r some True Facts about Car.

Fact - 1) Car is an Ultra-fast depreciating item among every otherm liability of world.

Fact - 2) A newly buy Car will loose over 60% of its value within first 4 years.

Fact - 3) True Rich people mostly buy a 2nd hand car.... u believe it or not but this is true....they buy just 2 year old car.... so that someone else has taken a loss of depreciation.

Fact - 4)True Rich people always buy a Car with Value of not more than 1 % of their total wealth.
say for example,
if their Net worth is Rs. 1 Crore than 1 % of it is Rs. 1 Lac (1,00,000).
its impossible to buy a new car out of Rs. 1 Lac only. so what they will do?... they will buy 3-5 year old 2nd hand car worth of Rs. 80-90 thousands.

if their Net Worth is Rs. 10 Crore than 1 % of Rs. 10 Crore is Rs. 10 Lacs. so they will buy a car Maximum of Rs. 10 Lacs ....and so on......

True Rich never buy a Car more than 1 % of their Total Net Worth....

What middle class will do?....

Suppose a Typical Middle Class have Net Worth of Rs. 20 Lacs..... what he/she will do? he/she will buy a Car Worth Rs. 15-20 Lacs on Downpayment.
And will pau its payments for years.....

What ideally he/she has to do? id his/her Net Worth is Rs. 20 Lacs?.....

Answer -

- 1% of Rs. 20 Lacs is Rs. 20,000 (20K).

- so either buy 2 year old Two wheeler out of it

- or wait to increase Net Worth

- Or if buying a Car is a Necessity than buy 8-10 years old Car worth Rs. 20,000.

- He/she Must have to wait untile their Net Worth increases before they buy expensive Car.

But in Any Circumstances Don't Buy a Car worth more than 1% of your Total Net Worth.
This is Very Important......

Either u buy a 2nd Hand Car or Wait until your Net-Worth increases so much that its 1% is worth of 20,30,50 Lacs.....

Than and only Buy Expensive Cars..... 

How to become rich quickly

 


Well.... This Article is not about building a Wealth. But this article is about Creating a Wealth or you can say its about generating a new wealth.

Creating a Wealth means Generating a new Wealth like Government prints its own money.
So u will ask than how can this possible?
How one can Create Wealth?...

Well... The Answer is "Taking Your Company Public"
yes...This is true.... Taking a Company public means creating a new wealth.
How?.... Here is the Logic behind it.......


Suppose today you have registered a new Company having a Capital of Rs. 1,00,000 (1 Lac) divided into 10,000 Shares of Rs. 10/- Face Value Each.

Now u start doing a business by this amount and after 10-15 years the Valueation of the company becomes Rs.10 Crore right?
SO now company's net worth is Rs. 10 Crore so now u can have 1 Crore shares of Rs.10/- face value each right?.... (10 Crores divided by 10 = 1 Crore Equity Capital)

so now company's Equity Capital is 1 Crore Shares of FaceValue Rs. 10/-

So 1,00,00,000 Shares multiplied by Rs.10/- = Rs. 10,00,00,000 (10 Croes).

Now your Company is eligible for going a public according to SEBI's Guidelines.

Now your Company's Share Capital is 1 Crore shares of Face Value of Rs.10/- each.
Now you Sell your 10% Company to public by IPO(Initil Public Offering / Public Issue ) route at a price of Rs.100 per share (Face Value of 1 share is Rs.10/-)

Now 10% of 1 Crore shares is 10 Lac shares (10,00,000). so u have sold 10 Lac (or 10% of the Company) to the public at a Share prize of Rs. 100/- per share. So you have raised Rs. 10 Crore (10 Lacs multiplied by Rs.100/- = Rs. 10 Crore) from the public for your Company by selling 10 lac shares (or 10% ownership of the Company).

Now 1 share having a face value of Rs. 10/- is trading at Rs.100/- on the Stock Exchange.

So now what will be the Worth of your Company?

Well, see... The Company has total 1 Crore shares having face value of Rs.10/- each and u have sold 10% of the total shares (10 Lac Shares) to the public at Rs. 100/- per share.

So if we count the value of your company by taking in to account Rs.100/- per share than the Net Worth of the company will be 1 Crore Shares multiplied by Rs.100/- = Rs. 100 Crores.

So Net Worth of the company after going public is now Rs. 100 Crore

Which was only Rs. 10 Crore before going to public.(before going to public 1 share was Rs.10/- only so 1 Crore Shares multiplied by Rs.10/- = Rs. 10 Crores only)

This new Net Worth of Company is known as Market Capitalisation
So after going to Public the Market Capitalisation of The Company becomes Rs. 100 Crore.

Out of which 90% company ownership is with you having net worth of Rs. 90 Crores (On Paper) and 10% ownership is with public having net worth of Rs.10 Crores (On Paper)

So now think in this way,...

New 100 Crore Rupees are added in to the economy after your company going to public right? 
Now Government has not printed these new 100 Crore rupees.
These are just on paper valuations that counted as Net Worth....

So what actually is it?

Well.... This 100 Crore Rupees are newly created into the Economy.

This is known as Actual Creation of New Wealth....

Earning a this much amount of Wealth is not possible. The only way is you have to create it.

Now See, Forbes Magazine,

All the Top 1000 Billionaires of the world have actually Created Wealth.
Observe this phenomena into Forbes Magazine.
All of them have created a business and taken it to the publice and now their own stake in their own Corporation/Company is worth of billions of dollars.

All the World's Richest people are not Wealth Builders but Actually they r Wealth Creators.

The Value of Indian Economy is US $ 1 Trillion. most of the wealth is created by this way. They have just total the valuations of the all the listed companies of the stock market.

The Greatet US Economy of the World is around US $ 12 Trillion. All of this Wealth is Created and counted by this method........