Five threats that can destroy your long term wealth creation

5 Threats You May Not Know, That Can Destroy Your Long Term Wealth Creation. Discover How To Win Them.

Is long term wealth creation easy or difficult?

Do you think it is a cakewalk as the online commercials claim it to be?

We shall discover!

Let us take an online investment calculator for example. You can find many with a simple Google search.

All you have to do is enter your data in the empty fields and click on calculate. The next thing you see will be the total return you will get on your investment. You only have to invest as it shows.

Long Term Investment Plan
Monthly Investment ₹21,000
Return Rate 12% p.a.
Investment Period 15 years
Your Long Term Return ₹1 crore ₹1 crore

Easy, isn’t it?

If you invest ₹21,000 a month, you will get ₹1 core in 15 years. What can go wrong?

The formulas these calculators use are international standards. They are tried and tested in real life for decades. And after all,

“Numbers Don’t Lie”

These calculators, as they get your inputs also do some things behind the screen. They assume several best-case scenarios that are just perfect on paper.

But when you come to reality, the case is different.

What are the assumptions that we’re talking about?

One can argue these are not radical assumptions but possible ones.

However, though they are possible, it doesn’t mean they have the probability of them happening. And the more the number of assumptions we make, the lesser is the probability of success.

Let’s discover what is behind these assumptions and how you, as an investor, can overcome them.

Assumption 1: You Will Earn Steady Income throughout Planned Years

You go to work, you do your job, you earn. How complicated can it be? You have been doing it for years. You are good at your job and you are sure you have the mettle continue this for years to come.


The Reality is:

  • There are millions of people who are stuck in a career rut and want to get out of it.
  • Almost all of the time, income does not increase at the expected rate.
  • There are companies that lay off employees to cut costs.
  • There are employees who accept pay cut just to keep their job.
  • Millions around the world lose their job due to change in Government and Industry policies.

All of these things are equally common in the present world and job security is a non-existent philosophy in the corporate world.

In fact, there are investors, in spite of being professionals for years have lost their job. And in turn, they have given up on their investments. Some investors are even forced to live on their investment money.

Especially for NRIs: since many countries are re-drafting their policies to give priority to its citizens over residents in employment.

The increase in competition and unemployment as every year passes only adds fuel to the fire. A simple ignorance in the name of a “safe assumption” can topple your life upside down in literally overnight.

Be At the Top of Your Game:

The chances of losing your source of primary income are high.

You can overcome this challenge by keeping yourself up to date and relevant with regard to your profession. Position yourself at the top of whatever you do. Remember, only the slowest zebra of the herd gets hunted down by the lion.

Increasing your professional connections and learning the ability to market your skills will add up to your employability.

In addition, you can also leverage your skills to generate a passive income. A passive income will serve as a second support point to your personal finance.

So, when you lose a job or decide to switch jobs as part of your career growth, you will have

    i) Marketable professional skills.
    ii) Connections to find the right opportunity.
    iii) A passive income to support you during the job search.

With these things, you can secure your steady income in this insecure job market.

Assumption 2: You Will Have Enough Surplus Savings To Invest Every Month

Having a secure steady income does not necessarily mean you are going to save or invest at a steady rate.
You may have decided to only spend so much and save a part of your income to invest. You have prepared a spreadsheet to budget and track your expenses. You are seeing your money in numbers and you are ready to take control over it.

For example, if your income is ₹1 lakh a month, your budget may be to spend 70% and save 30% of the income. It is ₹30,000 towards savings for every month.

It cannot be that hard.

The Reality is:

Expecting your expense rate to stay at the same level is not a good idea.

It is because of the more you earn, the more your lifestyle changes. The market today does not care about how much you earn but they want you to spend as much as you can.

Even if you are conscious about your lifestyle, there are the unforeseen expenses.

Someone in your family may have medical emergencies or in need of prolonged medical care. Health insurances don’t always cover everything in the book.

You may have a child, which is an added responsibility. It is not going to be easy even if you plan for it beforehand.

Aim To Save In The Range:

If you are going to save and create long term wealth, plan your savings percentage to be in a range.

For example, as seen at the beginning of this section, if you are planning to save 30% make it a range. In this case, let the range be 25%-35% of income to save.

It means you must save at least 25% of income a month and anything above 30% is a “Job well done!” situation.

This strategy will ensure that even if you miss to save 30% your confidence will not be shaken. On the other hand, if you save even a little more than 30% it will encourage you to save more the following month.

This kind of positive reinforcement will help you easily adapt yourself to save and invest for long term wealth creation.

Assumption 3: Your Savings Will Give You Solid 12% Return Over Long Term

Assuming a 12% return for long term investments is a fair bet, isn’t it?

Long term wealth creation means more than enough time for wealth to grow. You invest, it multiplies and the investment grows exponentially.

The Reality is:

Not every investment option can give you a 12% return. Savings, fixed deposits or any other investment option offered by the banks can only give 9% at max.

Afterwards, you will have to pay the tax, which means post-tax return will be around 6-7%. And then there is the obvious inflation over years which makes sure the real value of the investment stays the same.

Real estate and gold investments lack flexibility and the appreciation rate rely on too many unpredictable factors.

In fact, the only investment option that is also close to the safer side is the equities. But our society as a whole, do not have a good idea about the equities.

Investment without discipline, without form, will return you nothing. It is the lack of discipline among that causes a bad impression on equities.

Invest Systematically:

A systematic Investment Plan (SIP) of equity mutual funds is shown to give a CAGR return of 12% in the long run.

Besides, it can also help you as an investor to develop a disciplined approach towards investments. Lack of discipline is the major reason why people, in general, have an aversion towards equities investments.

If you are a beginner investor and are new to the equities, you can always make use of a consultation with a certified financial planner.

Assumption 4: You Will Not Make Mistakes And You Know The Market Behaviour

What majority of the amateur investors assume is once they start investing they can keep the investment in its track as they keep on growing. This assumption comes from the assumption that the stock value will always be on the rise, once you choose the right mutual fund house.

The Reality is:

In the short term, you are going to see a lot of ups and downs in the market.

Regardless of the fund house and their performance, fund values will always be fluctuating. In some cases, your stock values will even hit the negative numbers.

Do you know what the investors do when they see this instability of their stocks? Particularly when long term wealth creation is on the line?

They panic!

In a handful of cases, investors show a knee jerk reaction that causes them to hold on investing until things get better. Some investors go to the extreme step of stopping the investment and give up on their long term wealth creation.

Be Indifferent:

Do not let the market behaviour influence your behaviour towards your investment.

The success of any investment, especially long term investments depend on 10% decision making and 90% investors’ behaviour.

For example, if the market goes down, it’d be a good time to sit back and observe than to give in to the fear of losing. Remember, stopping your investments will only make your loss permanent.

In this period, invest more instead of stopping your investments. It is because if there is a market down situation, mathematically there will be a market-up situation.

If you can endure through these fluctuations for the planned long term, you can get your 12% return on your investment.

Assumption 5: You Will Not Cash Out Before The End Of Investment Tenure

You decided to create long term wealth. You planned, you invested, and you endured.

If you can do all the above, you can complete investment tenure without cashing out as well. This is an easy assumption, not hard at all.

Also when you are too focused on wealth creation, you can actually do it. The assumption will turn out to be a fair one.

But The Reality Is:

i) The Evitable Scenarios:

Being inclined to create wealth for a “long term” can drain you of your energy faster than being easy going. Or when you create wealth effortlessly, you could fail to appreciate your hard work.

In both these cases, there is a high chance your attitude towards money will change. Spending in thousands will become a common habit for people who were once spending in hundreds.

The special case: A few among the investors try to be too smart and transfer their investments to “secure” FDs in parts. This could destroy the whole purpose of long term wealth creation by diluting your focus. This approach is acceptable to a certain extent depending on how close you are to your financial goal.

ii) The Inevitable Scenarios:

When things under our control are like these, there are some inevitable causes that will force you to spend from long term wealth.

For Example, Living in a tropical country like India will assure a cyclone or at least a flood by cloud burst every monsoon. A natural disaster means property damage. Or an unforeseen health issue is always on the table for all mortals.

Either way, near the end of investment tenure, an investor will be tempted the most to cash out and distort the actual long term wealth creation plan.

Prepare And Refrain:

For evitable scenarios, you may try to refrain from going beyond your spending limits.

The best way to do this is by

    i) Following the basics when you started the long term wealth creation process.
    ii) Analysing the consequences of cashing out before maturity.
    iii) Reminding yourself of the reason why you started the long term wealth creation process.
    iv) Valuing your wealth and hard work more.

For example: If your target long term wealth is ₹1crore worth and you are at ₹95 lakhs now, you will reach your goal in 6 months max, at 12% return.

But, you decide to cash out ₹20 lakhs to buy a new car. It is not wrong to spend your money but is definitely a bad decision. You must know that it will cause a big dent in your long term wealth. Any action like this will extend your long term for 2 more years.

Are you willing to face the consequence of the 2-year extension?

And for the inevitable causes, you may prepare a plan to tackle them.

For this you may either prepare a plan by,

    i) Buying health insurance, having an Emergency Fund, Insuring properties, etc.
    ii) Hiring a professional financial planner

Preparing your own plan for the inevitable is appreciable. If you can choose the right insurance products and make some really good money decisions, you can succeed.

However, it would be better if you can prepare a plan that aligns with your long term wealth creation process. Professional Financial Planners are a handy tool to make use of in these delicate financial situations.


Long term wealth creation is a life mission. It will test your strength and patience the most.

If you are someone who is afraid of or has aversion to equity mutual funds and delayed gratification, you have to be extra cautious. In short, follow these things to succeed over the common assumptions and the challenges they pose.

    iii) Keep yourself employable and create passive income.
    iv) Save in range to keep your confidence up.
    v) Develop discipline with Systematic Investment Plans that give 12% returns.
    vi) Think long term and keep your patience.
    vii) Refrain from temptations to spend before succeeding.

Investors, successful in the creation of long term wealth did not succeed just because they took a great investment decision. They created long term wealth because they were consistent in following the basics.


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