Wealth creation is value creation

Wealth creation has always been about value creation through innovation and invention. The richest people in the world today, Bill Gates, Warren Buffett, Carlos Slim, Larry Ellison, Koch family etc., have created value by building businesses.

Wealth creation happens by deploying capital to create value. Capital could be any asset like cash, land, an idea etc.  Uber has neither invented cars or cab service but created a service to connect them in a seamless manner to ensure great customer experience. iPod has neither invented music or a music player, iPod redesigned the way we experience music and along the way transformed the music industry as well. Microsoft and Oracle enable people to better organize their information and created huge value by transforming the way business is done.  Investors like Warren Buffett have provided capital to great companies and helped them create value. Deploying land for farming, mining, building a factory, a hotel or an apartment complex will have a potential to create wealth.

We Indians have an obsession with real estate and gold and believe buying real estate or gold is creation of wealth as we believe that they will continue to appreciate. Buying real estate or gold is actually storage of wealth and not creation, it is their deployment to create value that will generate wealth. Our ratio of Financial Assets to Real assets is 14%, we rank 167 in the world in terms of this ratio, we are behind Pakistan, Sri Lanka, Nepal and Bangladesh!!!.

India has 1000 GW shortage of power, there are great opportunities to invest in transport sector, health care, education, IT, services etc. We believe investing in businesses operating in India provides a very profitable opportunity. To build wealth, one should consider deploying 20 to 40% of their assets in equities over a 3 to 5 year period.

Happy investing….

 

 


 IndusWealth:Making your money work for you

About Praveen Reddy

http://in.linkedin.com/in/praveenreddyinduswealth

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  1. While the post alludes to the mega opportunity that exists in India’s SMOKE sector, its also the sector which is riddled with rampant corruption, bad corporate governance & has caused ballooning NPA especially for PSBs. Scores of retail people have lost their hard earned money investing in SMOKE sector. Unless there is a clear policy definition from the government, debt reduction & improvements in corporate governance, this sector can’t attract serious investments.

    I agree for the other sectors like Education, Healthcare & IT are proper investment opportunities. However healthcare (or pharma) sector need to improve their internal quality procedures to avoid FDA bans. Its quite natural that with the growth of India generic drug makers like Sun, Lupin FDA & other western regulators will only tighten the compliance & audits.

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