Published On: Thu, Mar 7th, 2019

3 Wealth Ideas Which Sound Too Good to Work in the Long Run

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“A scheme that doubles your money in 5 months!”Now, who in the world wouldn’t want that?In the opinions of experienced investors, anyone who’s offering such returns is usually trying to take investors for a ride.
These investments, like Future & Options, Stock Trading, Currencies etc. nonetheless sound too good for a first-time investor. Afterall, who doesn’t want good returns in a shorter time?

wealth ideas

In rare cases, you may come across investors who have experienced such bliss with their money. However, these are more like a jackpot moment; sometimes you hit, mostly you miss.

Are You A Speculative Investor?

Most of these speculative investors are fund managers or professional investors spending most of their time bidding for the opportunity. Can you invest most of your time looking for such opportunities in the market?
If you are into a profession, and objectively analyse the highest grossing investment of your life, it’ll be your profession. And,unless your profession is investing you should be looking for a longer -term investments.

Why Do You Need Long-Term Investments?

Essentially for the following three reasons:

1. Time is the biggest factor for growing wealth
2. For Long-term wealth, your investments should be stable
3. With Long-term investments,you can build wealth within your means

To understand the three reasons above consider this example:

You are earning Rs. 1 Lakh a month, spending Rs. Fifty thousand on household expenses, and left with Rs. 50,000 for investing.

Investing this money in a short term instrument will mean either you will have grown the money within a short period, or you will lose a part of it.

However, if you choose a long-term investment like PPF, or since you are an aggressive investor an ELSS or ULIP, chances are over the next few years your money will only grow.

The fact that your wealth can diminish as fast as it can rise in a short-term investment makes them too risky to build wealth.

Short-term may be, however, good to spice up your portfolio once in a while, provided you can afford it.
How To Check Your Affordability for Short-term Investment?

The best and easiest way to assess your capacity for the very attractive short-term investment options is the Financial Needs Pyramid.


So, what does a financial needs pyramid mean?

It means that you start at the bottom and your savings should be allocated based on the size of the level. Here’s what each level means:

Contingency Plans

The first level is the protection or contingency level where you allocate your savings to ensure financial protection like life and health insurance, and highly liquid investments. These investments will cover you financially under stressful situations.

Capital Accumulation

Capital accumulation investments are safe investments; however, less liquid than the contingency investments. Example of these investments is – Bank FDs, Debt Mutual Funds, ULIPs, PPF, etc.

Use these investments to accumulate funds for your medium-term goals likehouse purchase, car upgrade, home renovation, or travel, etc.

Growth Investments

Growth investments are long-term,high-risk, high return investments, like equity stocks and mutual funds or ULIP Equity Investments.

These investments are great to allocate your savings towards your long-term goals, like higher education of kids, or your retirement.

Majority of your future investment plans fall into capital and growth investments.

Speculative Investments

Once you have allocated to all the above needs and goals and still have surplus funds, you can look to speculate a little.

This is the spice you would want to add to your overall portfolio. But, given the very high-risk nature of these investments, it is wise to keep your exposure minimal.

Other Benefits of Long-Term Investments

Long-term investments are not just great for wealth building; they can also help your savings and other advantages.

Tax Savings

Many long-term investments can also become an investment for tax exemption. For example, money invested in PPF, ELSS or ULIPs can get you tax exemption on up to Rs. 1.5 Lakh of your annual income.

Insurance Cover

Another benefit is security for your financial goals. Unit Linked Insurance Plans are offered by Life insurance companies like Max Life, ICICI Prudential, etc.

ULIP plans offer life cover along with the investment options. Child ULIPs are especially designed to assist your kids financially even if you are not there to ensure it.

Thus, allocate your savings following the financial needs pyramid and ensure a stable financial future.

About the Author

- Paul Linus is an eminent online journalist who has been writing news, features and editorials on different websites from across the world for about a decade. He can be contacted at

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