CashCow Chapter 3.1 – Seeds of Wealth

Let’s do a quick re-cap.

Module 1 – How to manage your existing income and expenses. Utilizing the power of ‘Faltu Kharcha Fund‘. Getting rid of debt and saving money with both hands using credit cards.

Module 2 – Protecting yourself against Emergencies. Building your own bank a.k.a E-fund. Calculating the right amount for Term Insurance and Medical Insurance. Strong advice to stay away from ULIP and Endowment plans.

If you have grasped the first two modules then only continue with Module 3.

Because from here onwards we are going to talk about wealth creating through at least 10 different ways of investing…

Investing by balancing risk…

.. and with a target of achieving a minimum of 15% annual return.


15% annual return means making 27 Lakh & 86 thousand in 10 years by investing Rs. 10,000 every month.


At the same time, if you invest Rs. 10K every month in Fixed Deposit of 7% returns (or RD) for 10 years then you would make only 17 Lakh & 40 thousand.


Understand first, that a 7% return can help you cover only the inflation. That is “mehngayi“.

You can make wealth only when you beat inflation.

Watch this beautiful Thai Ad (The Dream), a heart touching video to understand the concept of inflation in real life.

Did you feel the pain of the boy who saved every penny for his dream?

We don’t want to live like him, right?

Warning: Don’t continue without completing the first 2 modules because we are going to refer to some concepts here.

Anyways, there is no point in creating wealth if you still have unaffordable debts or have not protected yourself against emergencies.

Do you remember we talked about Avoidable Expenses?

Look back at your numbers and see how much money you can suck out of your Avoidable Expenses.

Route that money to your investments for faster wealth creation.

Money source for Investment

As investments need some time to mature and the magic of compounding to grow big.

Practically, you can start investments with a;

  • Single-shot investment — for example, Rs. 1 Lakh and then a
  • Monthly Investment — of Rs. 15,000

Replace the above numbers as per your income, savings and expenses.

You can go with another combination like Rs. 50K one-shot investments and Rs. 5K monthly investments.

Or if possible, a Single-shot of Rs. 10 Lakh and then Rs. 50K monthly.

I will showcase more than 10 investment options in the next chapters but the wealth can be maximized by investing in “Stocks” and “Businesses”. 

Both are risky but rewarding in the long-term… I would say the ONLY way to generate multifold returns if we can balance the risk.

Only stock & business offer the real possibility to turn Rs. 1 Lakh into Rs. 10 Lakh in a year but the success rate is very low for that level of return. 

People also lost their entire wealth in stocks and businesses, again the failure rate of that level of loss is also very low.

We are going to stay in the middle.. by balancing risk with the realistic expectation of 15 to 20% returns.

To avoid wealth erosion, we will also diversify investments in different asset classes.

You have to create a portfolio that gives you an overall return of 15%.

Possible assets include

  • Stocks (Equity)
  • FD + PPF + Govt schemes like NSC
  • Corporate bonds
  • Debentures & NCDs
  • Exchange-Traded Funds (ETF)
  • Commodities like gold, silver, agro products
  • Mutual Funds schemes
  • Cryptocurrencies
  • Real Estate
  • Web domain names
  • Affiliate websites
  • Day trading (F&O and intraday trading)
  • P2P loan

You can diversify as shown in the below image if you have Rs. 1 Lakh for investment in your portfolio.

Return from Investment portfolio
  • Rs. 10K in option A (like FD, Govt schemes) that gives 8% returns
  • Rs. 10K in option B (like cryptocurrencies, F&O) that can give 30% returns
  • Rs. 20K in option C (like stocks & mutual funds) that can give you 20% returns
  • Rs. 60K in option D (like NCD, corporate bonds) that can generate 13% returns.

You can do your own permutations and combinations depending on your familiarity with the investment assets and risk capacity.

You can experiment with the numbers on the spreadsheet (Ask for the spreadsheet link if you want to follow my template). 

Try changing the overall returns and you will see that if you change the return to 10% then the wealth corpus comes down to Rs. 48 Lakh. 

If you are able to increase the returns to 18% then you can have approximately Rs. 95 Lakh with you.

By the end of the 15th year, you should try to look and see what will be the changes around your life and finance. Work with the most realistic numbers that match your income and expenses.

The Challenges

#1. Avoid negative returns

The biggest challenge is to avoid negative returns in all scenarios because negative returns will eat up gains from other investments as well.

For example, in the above portfolio the Rs. 10K investment in option B can give lower returns (less than 30%) or negative returns.

You need to check exposure to risky investment accordingly. Thus you will require continuous monitoring & restructuring portfolio every 6 months.

#2. Picking Investment class

Invest in assets that you know and understand.

Do not just invest because an asset is giving high returns. You either need to spend a lot of time understanding it or chances are that you may miss an important risk element that can hurt your investments.

You can pick investment assets by checking your expertise level on a scale of 1 to 10 for different assets.

For example, you know bank FD very well and can assign 8 on the scale, whereas, investment in cryptocurrency can be at level 1 or zero on the scale.

Mark your expertise rating for each investment section in the excel sheet.

#3. Allocation of money

People try to put everything in one asset that promises maximum returns. When it turns bad then you end up making losses.

Allocation of money in various instruments should be based on your risk-taking capacity.

You should allocate a lower amount of money in a particular asset class with higher risk.

Once you get the confidence in high-return high-risk investments then you can allocate more funds to that asset class.

For example, if a person feels that domain investing is risky and on the risk scale of 1-5 marks at 5 then he should invest Rs. 5000 only.

If you know a little bit about day trading then you should invest only Rs. 10,000 because that may be risky for you.

You may be comfortable investing in mutual funds then you can keep a larger share of Rs. 60,000 in mutual funds.

The rest of the money i.e. Rs. 35,000 can be invested in stocks.

Allocation of Investment portfolio

(Sorry for the bad handwriting in the above image)

The above example is hypothetical and everyone needs to do their own allocation based on their understanding and risk perception.

#4. Rebalancing of portfolio

After investing you need to keep an eye on the performance of the various assets to safeguard your total investment portfolio.

You can shift the money to some other assets after six months if you see one of the assets is not performing well.

You can also replace when you have gained more confidence and expertise in another asset that can give you more than 15% returns (e.g after learning how to run affiliate business)

Rebalancing helps you keep your investment goals and return targets intact.

Protect your investment money from yourself

The chances are that you burn your investment money in online shopping when you keep it in your saving account.

To avoid such a scene, keep a separate saving account where you keep the money for future investments.

Have an EMI like arrangement where the allocated investment amount gets automatically deducted and gets transferred to the investment pool account.

You will be able to clearly monitor and allocate money for investments and not mix up with monthly savings and expenses.

Today’s assignment

Allocate on papers, how much money you should invest in the different asset class to get the overall 15% return.

If you don’t have time to complete the assignment today, then commit a time when would you do that so that you stay accountable.

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