How to create long-lasting wealth as an entrepreneur

When it comes to money, the internet is replete with information and advice. A single Google search will reveal myriad results; right from quick tips on how to get rich in six months to becoming a millionaire by investing in stocks, the information is endless.

However, what happens after this wealth is gained? No one really knows because there is a glaring information gap when it comes to the topic of creating long-lasting wealth.

Creating long-lasting wealth is a challenge and there are no shortcuts or one-size-fits all answers. For entrepreneurs, the task is even more arduous because a lot of their personal financial success is intrinsically linked to their business.

So how does one create long-lasting and sustainable wealth? For entrepreneurs, the answer lies divided into two buckets: personal and professional.

To kickstart their startup journey, a lot of entrepreneurs use their personal savings and family’s assets. And while this a common practise for entrepreneurs who are just starting out, there comes a point when the personal and professional cannot intermingle.

Entrepreneurs should strictly consider separating their personal wealth from their company’s finances. In doing so they ensure that their fate is not constantly tethered to the success or failure of their company.

No matter what financial crisis a company is in, an entrepreneur should have sufficient personal assets to be able to continue to provide a comfortable lifestyle for themselves and their family.

Also, it is important to balance out sectoral risks and ensure that there is no crossing of paths in terms of a company’s area of operation and personal assets.

For example, for a real estate startup founder to have heavily invested in REITs would be a mistake because if the sector were to face any volatility, both his/her personal and business finances would take a hit.

On the professional front, there are several ways for entrepreneurs to create long-lasting wealth.

Diversify portfolio

In order to avoid the risk of near financial haemorrhage, it is imperative to explore a variety of investment options such as Mutual Fund, ETFs, REITs, Index Funds and Equities. Diversification can help create a balanced financial portfolio of investments with varying rates of returns.

Additionally, startup founders shouldn’t shy away from exploring the international financial market horizon in order to protect their investments from domestic market volatility.

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Fixed income

Fixed income options are usually deemed as options for salaried employees or retirees. However, they hold several benefits for entrepreneurs looking to create long-term wealth.

Fixed income sources such as Exchange Traded Funds, Debt Funds and Money Market Funds provide a fixed stream of returns. And in comparison to stock market investments, fixed income options make for a safe and risk-averse financial safety.

There are two types of fixed incomes: -

1. Fixed income investments that are backed by the government which have an almost negligible credit risk.
2. Fixed income investments that are issued by private entities and are subjected to significant credit risk.

It is advisable to choose from some of some of the best government fixed income investment options such as Listed PSU Bonds, Senior Citizen savings Scheme, Public Provident Fund and Voluntary Provident Fund. Fixed income investments come with a clear set of benefits ranging from lower risk to a steady stream of income for entrepreneurs.

Establish multiple revenue channels

Multiple streams of revenue can allow for entrepreneurs to cover a variety of costs without being cash-strapped. It also provides an additional level of financial security in case of business failure or market volatility.

Increased money and income also mean that entrepreneurs can scale their businesses faster by investing in their own companies and reinvesting further into new sources of income.

Appropriate asset allocation

Proper asset allocation can mean the difference between financial success and failure. Asset classes are made up of multiple securities that face risks on several fronts. They can be impacted by many risks such as liquidity risk, stock market variations, tax laws return and investment tenures.

Hence, it is important to assess the level of risk tolerance and choose a mix of asset classes that are suited to personal requirements.

Creating long-lasting wealth involves a gradual building of monetary assets and finances that can last for more than just a few years. This sort of an approach to wealth is thus fast gaining traction world over because it can help create an ecosystem that can give entrepreneurs a real shot at creating valuable generational wealth.