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''Hard work is like a staircase and luck is like a lift. Lift may fail but staircase is sure to take you to the top'' -- unknown

To be fearful when others are greedy, and be greedy when others are fearful -- warren Buffet

I am better investor because I am businessman,better businessman because I am no investor. -- Warren Buffet

1/06/2007

Think like a billionaire to be one



Becoming a billionaire is everyone’s dream. Very few people, however, are aware how to convert this dream into reality. And even if one is aware, one might not have the right means to do it. For, if this wasn’t true, most people around the world would have become billionaires. There are only 793 people worldwide, with an average net worth of $3.3 billion, who are fortunate enough to be included into the billionaires’ club.

JOIN THE CLUB

There are 793 billionaires worldwide, with average net worth of $3.3 billion

The fastest way to becoming a billionaire with the least capital investment is entrepreneurship and innovation


An investor can rake in high returns by using the magic of compounding


True, if you are looking for a magic wand to realise your dream, then forget it. There isn’t any shortcut, except of course if you're planning to do any illegal thing like Calvin Ayre who got rich by taking illegal bets over the Internet, or Roustam Tariko who came out of nowhere to build a fortune by turning middle-class Russians into debt-addicted consumers. However, if you have enough guts as well as the right instinct, you might not be far away from your dream goal. At least, you may become a rupee billionaire in reasonable time.

Still don’t believe me? OK. Tell me the worth of Rs 100, at 10% interest, after 150 years. It’s Rs 16 crore! The same amount would grow to Rs 1,899 crore after 200 years. No, this is no magic, but simply the power of compounding, described as the eighth wonder of the world by Albert Einstein himself. What if someone in your family had left you Rs 100 in a bank account 200 years ago?

If you don’t have the patience to wait for such a long time, try some other ways and avenues. You may get the desired result even within 3 to 10 years, depending on the kind of investment and the risk involved.


Says Religare Securities head (wealth management) Amit Sarup, “Under normal circumstances, the return on investment will always be inversely related to the risk that the investment is carrying. Keeping this basic thumb rule in mind, there are various investment options which can increase the investor's wealth multi-fold.”

At the safest end of the spectrum are relatively risk-free investments such as National Savings Certificates, fixed deposits, debt mutual funds etc. which in the current scenario can give a return of approximately 8-9 % per annum and can double your money in 8 to 9 years.


“An extremely conservative person can easily look forward to an 8% annual return compounded monthly and make Rs 100 crore by investing Rs 1.37 crore every month for five years. If you are ambitious and willing to take risk, you can get the same amount by investing just Rs 73.55 lakh every month for the same period at 30%. But, with more reasonable level of returns of 20%, you can reach the 100 crore mark by setting aside Rs 98.2 lakh every month for five years,” says Invest Shoppe CEO Ashish Kapur. Thus, you can opt for a high risk investment and venture into equities to get a much higher return in a shorter time-frame. The flip side being that equity markets are volatile and can also result in capital getting eroded in case of negative movements in equity markets.

“For an individual, one of the best ways to invest into equities is by investing via the mutual fund route. In the past couple of years, the returns have been phenomenal with average returns of 45-50 % per annum. However, even if one looks at the performance over much longer periods, there are many schemes which have given an annual return between 25% and 30%,” says Mr Sarup.

If you look at this option, you need Rs 50 crore to reach a figure of Rs 100 crore within three years itself. If you want to invest a smaller amount, an investment of Rs 15 crore can reach the magic figure of Rs 100 crore within 7 to 8 years, going by the historical data.

Another avenue to rake in high returns is by taking the private equity or venture capital route. However, the risk involved is also high as the business itself carries the risk of failure.

Real estate investment is the another option. “Other ways are trading in equity derivatives, where one can take huge position by just paying small margin money. Commodities, art etc also provide avenues for acquiring humongous wealth provided luck favours you,” said Mr Kapur.

However, the fastest way to becoming a billionaire within the least possible time and with least capital investment is entrepreneurship and innovation. “All the equity-related investment avenues mentioned above are ways of making money by riding on somebody's success in entrepreneurship. Of the 793 billionaires declared by Forbes, over half are self-made who have built their fortunes just by being innovative and skillful entrepreneurs,” avers Mr Sarup.

Surprisingly, some of them have even made it the fastest. For instance, it took Jeff Bezos just 4 years to become a billionaire. And our own Infosys began its journey in 1981 with an investment of $250 only! If these people can make it, why can’t you? All you need is innovation and the right opportunity.

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