Wealth creation is the process of generating wealth through the accumulation of assets. This can be anything from property and investments to businesses and savings. Wealth creation is essential for financial security and independence. There are many strategies to create wealth, but the most important thing is to start early and continue to invest wisely.
The Importance of Investing
Investments help you to grow money over time by selecting financial products that have the potential to increase in value. Generating income through dividends, for example, can provide you with a source of income to supplement your regular earnings.
Choosing the right investment for your situation is much easier when you have clear goals. Knowing what you want to use the money for and setting a clear timeframe will help you determine how much your money needs to grow over this stipulated time and which type of investments would be suitable.
Types of investments
We can categorise investments into three main types. The type of investment that you choose should be based on your goals, risk tolerance, and time horizon.
1. Debt Backed Investment, also known as Defensive Assets
This refers to any debt shown on a balance sheet and includes:
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- Cash
- Fixed interest investments
- Debentures
- Bonds
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2. Equity Investment, also known as Growth Assets
The goal of these types of investments is that the returns outweigh inflation and include:
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- Shares
- Property
- Private Equity
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3. Alternative Investment
These are usually unrelated to the debt or equities markets and can include:
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- Agriculture
- Commodities
- Crypto Currencies
Each has its own pros and cons, so it’s important to do your research before making any decisions.
Diversifying and Risk
There is no surefire way to guarantee success when investing, but you can minimise risk and maximise returns by diversifying your portfolio. By investing in a variety of asset classes, you can offset losses in one sector with gains in another. For example, if the stock market is struggling, you may be able to offset those losses from your investments in the real estate market.
The Importance of Financial Guidance
The world of finance is complex and ever-changing, and the average person may not have the time or expertise to stay on top of all the latest developments. A good financial advisor will take the time to understand your goals and risk tolerance and guide you to feel financially secure and comfortable.
Creating wealth is a long-term process that requires patience. Blenkhorn Kirkwood has been enhancing the wealth of their Sydney clients for over twenty years. We deliver international wealth management experience with outstanding customer service to our northern beaches’ clientele.
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