Unearned income

It all boils down to a four-letter word called risk: find the inclination to court it, and you'll be on your way to riches.
Gautam Chikermane
WHY IS it that the rich keep getting richer and the poor poorer? What is it that prevents wealth from percolating down to the man of merit from the man of money? Why are the Bill Gates or Warren Buffetts, who have created immense wealth for themselves on their own steam, so few? In this age of knowledge, why is it that the knowledgeable person is found working for organisations either run or funded by the rich–why isn’t he wealthy? What is it that keeps money in the hands of the rich?
The answer: unearned income.
I owe this insight to a friend, who claims that the only way people become truly wealthy is when they don’t earn the money. What he is really saying is that people become rich only when they start making their money–rather than themselves–sweat for what they earn. Almost as if they had created an obedient, intelligent robot. When I examined this closely, I found myself nodding in agreement. This is a valuable lesson for us middle-class people, for whom the whole philosophy and process of wealth creation is relatively new, and one which has only recently got moral sanction. For decades we’ve lived in the belief that we have to earn our daily bread–daily.
Opinion in Outlook Money

A deadly mistress called greed

When you invest in a stock you think will quickly give you 30% be ready to lose as much as quick.
Gautam Chikermane
WHAT ON earth could make a man kill his children? When the answer is ‘money’, a crime that could have been tragic seems only appalling. Forty-year-old Sanjay Agarwal and his wife Sapna (33) decide to do away with their lives–and take those of their two innocent children, Ashita (10) and Chirag (6), as well. They killed themselves and their children by hanging from a fan in their house in Delhi on March 21. Reason: Sanjay, who worked with Omkar Securities, suffered heavy losses in the recent stock market crash, the second in 12 months, lost his money, his clients. And his life.
Five days earlier, on March 16, Virender Kumar Aggarwal (48) of Hissar (Haryana), and his wife Ramkali committed suicide at a hotel in Delhi’s Paharganj. In his suicide note, Virender, a head cashier at Punjab National Bank, admitted to pilfering Rs 70 lakh from the Bank Employees’ Cooperative Society. He was a known stock market gambler, but no one believed he would gamble the society’s savings away. He did. Why?
Opinion in Outlook Money

The spirit of enterprise

When you get in touch with the spirit, you will be able to take greater risk and turn resources into wealth.
Gautam Chikermane
Nainam chindanti sastrani; nainam dahati pavakah;
na cainam kledayantyapo; na sosayati marutah
No weapon can pierce the soul; no fire can burn it;
no water can moisten it; nor can any wind wither it.
–Bhagawad Gita, Chapter II, Verse 23
If it’s a comfortable retirement or a home in the hills you’re looking for, you could manage it with your monthly pay cheques. Invest money in diversified financial instruments, ranging from the plain-vanilla, risk-free schemes from the post office like public provident fund (it currently yields 11 per cent) to medium-risk instruments like an index fund (a mutual fund that mirrors a stock market index, like the Sensex or the Nifty, which could give you 18 per cent). You could also look at putting some of your money into high-risk sector funds or directly in stocks (25 to 30 per cent).
But if it’s wealth you want to create, the raw material is risk, the process is entrepreneurship. The highest investment and financial risk is taken by entrepreneurs, a breed of people that is virtually impossible to define (Peter Drucker’s 1993 masterpiece Innovation and Entrepreneurship: Practice and Principles is the best treatise on this subject). As a group, they use and optimise the physical, financial and human resources of a society. When they succeed, they become the leading wealth creators of a country. When they fail, they lose their investment–and that’s their risk: the risk of venturing into new, uncharted territory or looking at old businesses in new ways.
Opinion in Outlook Money