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Keep your Money close; Wealth closer



Money is what you see. Wealth is what you accrue over time. Epic and legends are created just to tell how good or bad wealth can become. Let me take you on a journey to show why it is hard and what separates the wealthy.


Last year I had the privilege to talk to a lot of smart clients. And they shared their personal stories and approaches to solving the creation of wealth. It is an amazing experience. But there is just one problem. 80% of what we think we know about how money works correlates to 0.00001% of actually what happens in reality. This is a difficult number to get our heads around. Think it this way - who would know about cricket better? Me or Sachin. Why? Because he would have faced 10,000 balls for every ball that I would have faced. This is what happens in money as well. We all are playing against many Sachin's - who would come on top?


This brings me to Warren Buffet. You should know that he made 81.4 billion of his total 84 billion after the age of 65. That confounds us. We can never wrap our heads around this as well. We can attribute and demonstrate the confounding phenomenon to 2 factors. Never lose money and improve the effectiveness of your savings rate. And remember Warren Buffet had 50 years of experience before he reached 65. That is 2 Sachin Tendulkar's lifetime of experience.


That brings me to the next question that you are thinking about. Didn't Warren Buffet was lucky and took his risk. Yes he was lucky in the sense he never bets on heads (+ve return); he bets only on tails (no -ve returns). There you have his first rule - Never lose your money. He defined his luck. What about risk? According to him, he avoids all risks. This is a worthy second rule of him. Never expose your money for heads (+ve return). Expose your money for tails (no -ve returns). The risk he takes is he does not want to be rich when everyone is rich. He does not want to be poor when