Wednesday, December 23, 2009

Wealth: Creation and Preservation

 There are many proven ways to create wealth in our global economy. And I mean the legit ways of creating wealth… and not by the unscrupulous ways of “Madoff” of this world.

“Long term wealth is created by high rates of consistent returns accumulated over a period of time─ with prudent use of leverage, and allowing time for the compounding of gains to do their magic in creating wealth of legacy proportions.”

So, what differentiates one type of investment from the other?

Well if you are diversifying, and I strongly recommend that you do, then what matters is the allocation of investment funds across the various asset classes… like real estate, bonds, stocks, and a family business that gets passed from one generation to the next. Since each asset class has its own rate of investment returns, therefore time horizon for growth to create wealth will vary from few years to several decades.

I know what you’re thinking!

You want to be wealthy early in your lifetime to be able to enjoy the fruits of your labor and your good fortune. That makes sense. I mean, what good a billion dollars would do you at age 90?

So, what it boils down to is the speed of wealth creation so that we can enjoy the fruits of our lifetime of labor… during our lifetime. And that’s where the “high monthly rate of return” comes into play…

“Wealth creation of legacy proportions is the miracle of high monthly rate of return, compounding and leverage.”

It is, therefore, understandable why our strategy focus is on exceptional long term growth and earning monthly income while we wait for long term growth to unfold …

“We invest in companies that ride the wave of change or bring about a paradigm shift with lasting and exceptional long term growth. We hold our core position, unless the fundamentals change, and ignore the short term gyrations. During volatile periods, we limit the down side by buying or selling options and do not trade for the sake of few pennies earned from scalping the market. However, from time to time, we may buy calls or sell put premium to leverage core holdings... or to utilize the available portfolio margin to earn risk free income by selling OTM puts/calls... with probability skewed in our favor at 80:20.

High monthly returns are possible due to our ability to control risk and avoid getting trapped in positions that run counter to long term macro-economic or current business trends.”

Having stated our wealth creation [investment] strategy, now we go looking for companies that ride the wave of change or bring about a paradigm shift. In the past, we have had the good fortune of finding a few diamonds in the rough and made some exceptional rate of return with companies like Intel, Microsoft, Dell Computers, Cisco, Qualcomm, Google and Apple.

The high-growth train of the 1980s and 1990s has already left the station, and some of us were left behind, muttering obscenities to ourselves on the platform. We have two choices facing us today in 2010. One option is to mourn our bad fortune, admit that high-growth stocks demand too much hard work and more than a bit of luck, and then resign ourselves to index funds, hoping to eke out 7% per year over the next 20 years. The other option demands boldness and vision. It asks you to forget the past and plan for the future by joining in the search for the great companies of the next 20 years.

Technology, for one example, is rapidly evolving and from time to time the opportunity of a life time stares you in the face, only if you have your ears to the metal and have an open mind.

After trading over a billion dollars in stocks and options over a 27 year period, I have discovered one technology company that is on its way to bring about a paradigm shift in the way we entertain; communicate; collaborate; and network with friends, families and business associates. And yes, while we wait for our investment in this hyper growth company to unfold, we are also generating over 10% income per month [on the risk capital] on a consistent basis... with risk controlled investment strategies that leverage portfolio margins.

Search for Hyper Growth:

Searching for hype growth companies is an on-going process and currently I see another paradigm shift taking place in the technology arena… the prime mover of business and life style changes in our lifetime. Besides technology, the other prime movers of business [and life style] changes would be the “peak oil”, “permanent demand destruction”, and “carbon footprint”. There is “nano technology”, but that is obviously covered under technology.

For now we will focus on technology and discuss the others at another place and time.

Stay tuned for Part 2... it will be here beore you know it.
Anant Goel