What takes to become a billionaire?
You either create value or you identify some one who is creating value...
Well I belong to the second category...having worked in the Capital Markets for more than 4 years...I have realized that the secret to creating tremendous wealth is to simply identify the pockets of value creation
From my readings so far, I have outlined the following ways to create tremendous wealth
[1] Invest in assets (stocks, bonds, real assets) not in liabilities disguised under assets (extravagant car, gadgets)
[2] Wealth can be created by holding your investments for a longer period of time and let your money work for you
[3] Stocks, especially small companies can give phenomenal returns over a period of time...The reason being that the best or the largest only have one way...downwards...where as the sapling always has the opportunity to become a tree
[4] However the rule of probability states that only one in hundreds can become a GE, Apple, Reliance, Infosys or Sony. Thus it becomes practically difficult to analyze these investments at an earlier stage. However I believe do look out for companies which are run by promoters rather than professional or government appointed managers. Also the promoters should hold at-least 50% of the shares. Also look out for companies which care for minority shareholders. This is best reflected in sustained out-performance of their share price over the benchmark index
[5] The next step is on operational excellence. I would be really looking our for companies with improving RoE, particularly whereby the first two components of RoE (Margins x Asset turnover x Financial leverage) are improving or at-least sustainable
[6] Finally I would look out for stocks, which are trading attractively within the sector. However I would look at the sector from a global perspective, considering the fact that the globalized world gives opportunities for businesses to expand globally as well for investors to invest globally
