Understanding each of your options in your journey of wealth creation will set you up well for achieving your goals. Getting the mix right creates the “the real thing”, the ideal wealth creation formula. Here is our view on various choices, based on our extensive observations and experience in wealth management:
You may be a visionary inventor, a brilliant entrepreneur or have superior deal-making skills, but you may be wondering how to convert this into a valuable business. And while we’re not in a position to tell you how to conduct your business, we’ve certainly witnessed extremely successful ventures over time, entities which have led to the creation of significant wealth.
So how do entrepreneurs do this? Quite simply: By owning shares in their own business, or shares in someone else’s.
Creating a successful enterprise in a growth industry or breaking ground with new ideas and new technology is the first step to creating a valuable business, a strong brand and becoming a dominant player in any industry. It’s the ownership of the business which creates value once the future earnings potential of the venture has been realised by the market.
Your career is your primary source of future wealth. A successful career, either in business or a profession, will reward you with significant income to invest for the future. Highly skilled people and specialist professionals are paid more due to the scarcity of their expertise.
By investing in yourself, cultivating your skills and building your personal brand, you will be able to command a higher income level for your services. Once there, be sure to insure yourself against temporary or permanent incapacity.
Even if it’s not your own business, owning shares in the company you work for can also be very rewarding. This step creates capital alongside your normal income. Buying shares or accepting share options in a successful company, be it listed or unlisted, has yielded significant wealth for many.
Hard work pays
Miraculous rag to riches stories where an individual sells their successful business idea for multiples of millions in reality are few and far between. Many business ideas fall by the wayside and only a few survive the long, hard road to success.
For the most part, the vast majority of wealthy entrepreneurs and professionals simply go the extra mile to achieve their success. There is no substitute for hard work, diligence and patience. It takes many years to create a solid, successful business or a trustworthy personal brand. Intense involvement in your business or career holds the key to your primary source of wealth.
The business of property
Many a fortune has been made in the property market by skilled property developers, dealmakers and individuals simply acquiring commercial and residential property for their own account.
A key benefit of investing in property is that it has the potential to increase your exposure with borrowed money. Gearing up on your investment properties is one way of getting ahead of the game, assuming that the market moves in your favour. Cycles of lower interest rates are the catalyst for property price increases and, with careful timing and a bit of good fortune, you could see your investment surprise on the upside.
Homes and holiday homes, a function of your success elsewhere, have proven to be a handy source of wealth creation on a secondary level in the overall portfolios of wealthy people.
While you need to apply prudence in using debt to finance these assets, we have witnessed significant value being created in some cases with these more “accessible” assets. People with a knack for property, gearing up, renovating and upscaling have gained significant ground in this field. But with property, the universal rule of “location, location, location” still dominates the outcome – your fortunes will rise if you are able and savvy enough to buy in up-and-coming, sought-after areas.
Diversified assets: Your proprietary capital
Investing for your own account is one of the fundamentals of wealth creation. Once your business venture or career finds traction and yields significant surplus income, it is essential to invest in a diversified portfolio of shares and listed real estate (traditional asset classes). Not only will you then be able to diversify away the risk of business failure, but it will set you up for an additional source of wealth creation. This is where you can use other people’s expertise and efforts to help you put your hard-earned money to work. In this space, retirement funds offer the opportunity to diversify your wealth in a tax-efficient way.
Wealthy investors are also able to add alternatives to their portfolios. Hedge funds, artwork and gold coins come to mind – asset classes which complement long-term wealth creation.
Real wealth creation is the reward for a lifetime of hard work, honed business skills, and sensible investing. A successful career, investments in quality business assets, property, and other financial assets, combined with a decent portion in your retirement fund, creates a formidable combination for wealth creation – this is “the real thing”.