Do you know who is the wealthiest person in the world ?
I am sure most of you would know the answer. Founder of Microsoft, Bill Gates.
Do you know how much wealth Bill Gates has ?
If you Google it, you will get an answer to this as well. $76 billion (~Rs 456,000 Crores)
But do you know what investments are included in $76 billion ? Most of you would think Microsoft shares, right ?.
Well you in this case, you would be wrong.
Read on to see how he used astute investing to significantly grow his wealth.
Bill Gates has only 15% (~$12 billion) in Microsoft stock. The rest of his 85% wealth is managed by his investment firm, Cascade Investment.
Gates’s net worth is stunningly unrelated to the stock performance of the company he co-founded 40 years ago. The large remainder of his wealth is tied up in an investment entity called Cascade Investment LLC, which is managed out of Kirkland, Washington. Cascade Investment LLC is a diversified investment company. Cascade controls stakes in more than two dozen publicly traded and closely held companies. Majority of Bill Gates worth is tied with various public and private companies in the USA. These investments are in the form of equity stake in those companies. Even the rich becomes richer by investing into a diversified pool of equity investments.
Unless your wealth grows in real terms i.e. above inflation you cannot become rich. Most of the people focus on getting the increments and promotions in their jobs but don’t care to grow their money. These are the people who primarily open Fixed Deposits with the hope that their money will grow. Bank FDs, Corporate FDs, NSCs, PPF and Government Bonds are designed as income products that cannot grow your wealth. In order to grow your wealth you need to have some exposure into growth assets too. Equity/Shares, Real Estate, Private Equity and Hedge Funds are all growth assets. Private Equity and Hedge Funds are only for the very rich. Real estate investment has its own challenge with respect to ticket size, execution risk and cash component. The easiest access for growth asset is equity investment.
Since everyone cannot afford to start an investment company to manage their investments, there are professionally managed mutual funds. A Mutual Fund is a trust that pools the savings of a number of investors. Mutual Fund is one of the most suitable investments for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. It is an ideal tool for people who want to invest but don’t want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not.
Start early and save atleast 20% of your monthly income into equity investments.