The money that you earn is what backs you financially throughout your life. The problem is when you realize that the money earned is not sufficient enough to cover certain long term/ short term needs. This is exactly why you need to plan for multiplying your income.
Wealth management is your master plan for building multiple sources of income that can keep you comfortable throughout your life.
In order to have a well-planned wealth management system at your disposal, individuals hire wealth managers who assess their income sources and their financial goals.
Wealth managers act like CFOs for individuals. A wealth manager will start by developing a plan for his client which will involve steps to increase his wealth keeping in mind his risk taking appetite, goals and his financial situation. Once this is done, the client and the manager meet periodically to make changes and update the portfolio as required.
Let us suggest you a few tips that could act as the backbone of your wealth management plan.
- Spend less than you earn– This has to be the most basic and obvious tip you’ll ever get. The reason we mentioned this is because if you are planning to start managing your wealth, this is where you need to start.
- Invest only after proper research- There are various investment schemes for you to choose from. It is very important that you have thorough knowledge about the scheme you wish to invest in. After all it’s your hard earned money that’s at stake. One of the most common mistakes committed are by people who listen to the words of their friends or people they know personally. Never have blind faith in anyone when it comes to investing.
- Diversify your investments- In the words of Warren Buffett, “never test the strength of the current with both feet”. The reason being that the market is a volatile place filled with unpredictability. One of your investments might be giving great returns for years, but that doesn’t mean you should invest all your wealth in the same place. Diversifying your investment will keep you on the safer side at all times and ensure that market fluctuations don’t mess your whole portfolio.
- Be patient- Investing is no doubt a thrilling game, but it is important that you be patient at all times. The nature of market is such that it could test your patience and cause frustration. Believe in your investments and keep monitoring them. Always keep an eye and observe the investments that are performing and non-performing and accordingly shuffle your investments.
We have spoken about wealth management from an individual’s point of view, but it’s certainly not that narrow. It is extremely important from a business’ point of view to keep an eye on managing its income, expenditure and planning for the future.
A fine example now in the news, is the story of Micromax. Micromax is a consumer durables company that started off by selling mobile phones and now is getting into selling fridges, washing machines and electric vehicles. From the time they were valued at Rs. 21,000 crores in 2015, to dropping to a valuation of Rs. 1500 crores!
Many Private Equity investors are now selling their stakes in Micromax for heavy losses. These PE players are selling their stake for Rs. 93.65 crore to the promoters, who will now hold over 85%.
So why are investors shifting their money away from Micromax, when the company still has a lot of sales. The reason is that there are many Chinese brands which have flooded the Indian telecom market.
Chinese brands have changed the entire mobile phone market in India. These firms introduced the latest mobile phones, advertised heavily and built a solid distribution network in the market. This put many established players like Micromax on the back foot and they have struggled to adapt ever since.
Venture Capitalists and Private Equity Investors are companies which have raised funds from other HNIs, banks and other financial institutions. They come under tremendous pressure to pull out of loss making investments. PEs and VCs have to make money and reinvest the profits in other businesses. The managers running the funds get paid only when they earn profits. By staying put in a company with a falling valuation, the chances of earning, are quite low.
This is what successful investors do. They move their money from one investment to another – multiplying each time they move it. That’s how they build their wealth. This is how HNIs grow their wealth, but remember this – they all begin at the same place.
Wealth management is one of the most basic financial information that a person needs to know. It doesn’t matter if you’re from a different background, because we all earn money and our goal is to multiply it.
BSE Institute’s Executive Program in Wealth Management offers you an opportunity to manage your money with ease. This is your chance to be the person who doesn’t have to worry about money, because money to work for you!