The importance of wealth creation can be summed up by a statement made by legendary investor Warren Buffet – “If you don’t find a way to make money while you sleep, you will have to work till you die”. What he meant by this statement is that one of the key objectives of wealth creation is the ability to generate wealth passively by investing money that has been earned previously. This way savings grow over time and add to the wealth of the investor. 

At the most basic level, wealth creation is just about growing your money to achieve various short, medium, and long-term financial goals. Short-term financial goals could mean saving enough money for a vacation or to buy the latest iPhone. These are typically goals that need to be achieved within a period of 3 years or less.   

Medium-term goals are usually investment goals that have to be achieved within a period of 3 to 5 years. Examples of such wealth creation goals can include saving for a new car, saving for the down payment for a new house, etc.   

On the other hand, long-term goals such as ensuring sufficient retirement savings can easily have an investment horizon that extends into multiple years and even decades. In this case, you need to ensure that you create enough wealth during your working life to support your post-retirement financial needs. 

Now as there can be multiple objectives of wealth creation along with different time horizons, you have to implement different strategies to achieve such varied goals. 

How To Choose The Right Investment For Creating Wealth

As an investor, you might have access to a variety of investment options. But just as each tool in a toolbox is suitable for a specific task, the same is also true for investments. For example, if you are saving for a financial goal that you need to reach within 6 months, you have to prioritize the safety of the amount invested over the potential returns you might get from the investment. That’s why low-volatility options like Liquid Funds and Fixed Deposits are the best investments for short-term investment goals.

But even though the safety of your investments is important, you have to prioritize growth of your investment to achieve long-term financial goals. A common instance of this mistake is opting for fixed return investments such as Fixed Deposits (FDs) over Equity-oriented investments such as Flexicap Funds when saving for long-term goals like retirement or a dream house.