What is the rich people’s investment strategy?

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Holy Grail of investment strategy is

The nutshell of investment is

  • how fast doubled your money and,
  • what was the initial investment ?

A rich Guy before making any investment looks at few needs

  1. Scalability – Ability to multiply
  2. Transparency – Frequent Updates
  3. Liquidity – Easy Exit

Enough of theory, let me demonstrate the various practical ways ;

  1. Using your own hands

A tea seller sells his tea for Rs 10. While cost of making that tea could be just Rs 5. Here he doubled his capital at every transaction.

The catch is, he will hit a upper ceiling someday. He cannot sell tea worth 1 crore even in a month. He is not scalable.

Same holds true for other business like selling cloths/Garments. Good profit margin. Not scalable.

Again, An restaurant. Awesome profit margin, Not scalable

You see, when you put your own efforts , your reach is limited at some point. You will be forced to hire new people to support that business. This reduces the profit margin because now , your cost of production increased.

Ambani has reliance Retail though. They have circumvented this issue by hiring manager, keeping a procedure of checks and balances. But, their profit margin has shrinked to barey 10% over all.

Scalability is a big limiter. Smaller the business, bigger is your profit margin. As you scale up, Profit percentage shrinks down substantially.

2. Tag along with someone else

Since its an daunting task to set up a business and grow it large yourself. Many Rich investors tag along with the already successful companies they know.

Think of it as sitting with this class topper all the time. You tend to mimic his approach towards studies and benefit with his company for sure.

how fast to double money is considered fair?

In india , Assured/guaranteed returns come via Bank Fixed Deposit. Check current Interest Rates:-

Using rule 72 ;

In 11.52 years (72/6.25), you will double you capital in India. zero risk. Zero time commitment, You can go for a vacation and be back to take double of your initial capital. It could be even 2000 crore into 4000 crore. Scalability is not an issue.

Lets assume, A human being starts to earns at age 20 & stays alive till 80. He/She can have probably 5 attempts with bank FD. (check the first image above)

Rich people want to double faster and get more attempts with any strategy they adopt. Their initial entry will be high too.

Businesses that doubles every 4–5 years;

  • HDFCBANK
  • BajajFinance
  • Nestle
  • Dabur
  • TCS

I believe,You got the point. Some business’s keep growing with a pattern of doubling at a fair time frame w.r.t risk free FD.

In 40 years, A person gets to do 10 attempts of doubling assuming, capital doubles every 4 years.

In 10 attempts, even a small 1 lac becomes 10.24 crore.

You ain’t gonna stop at just 1 lac, we both know that. You will earn salary and keep using these investment avenues to double capital ASAP with fair risk exposure.

This is how your “that” rich uncle made money. They bought some asset back in year 1990 and held onto it till 2020 (30 years). It was never an over night journey to richness.

Replace this Stock which is an asset, with any other asset like – real estate at a prime location, hefty quantity of gold , or some rare art.

Rich people stay rich by constantly doubling their networth as soon as possible.

Ofcourse they understand the importance of scalability & liquidity as well. You should be able to sell that real estate before you get stuck in a down turn market. That’s liquidity risk.

Conclusion

If you are reading me till here, Don’t be in competition with that uncle or cousin who is already rich. Maybe they started earlier than you or, they got few more doubling opportunities than you.

Chart your own path. Its always possible. It just asks for the right amount of patience. Getting rich is a choice. Not a fluke.

10 lac per year forever or 1 crore now?

Remember a 10 lac per year salary forever is a bad choice, against one time 1 crore.

Because, if you can even manage to get 10% interest upon 1 crore every year, that is 10 Lac regular income per year, forever and…. 1 crore stays as capital.

Am in the business of handling your wealth and getting you rich. I ask 10,000 rs for every 1 Lac that your earn. Just like amazon’s COD.

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