The Truth About Wealth & Wealth Management

What exactly is 'Wealth', and for that matter, 'Wealth Management'?

Many of us may have heard of stories of people who made tons of money from trading in the stock market, forex, options and the various kinds of investment vehicles. There are also many courses, workshops, seminars and training programmes that teaches the public how to do so, at a fee of course.

However, do you know that investing is only a part of wealth management? In fact, I can even boldly declare that it is not the most important aspect of managing your finances. Yep, you hear me right. How many percent returns you get from investing isn't the most important.

To put things into perspective, let us first understand what 'wealth' means...

Wealth is a measure of how long one can sustain his/her lifestyle without working. For example, if Mr A has $100,000 in the bank and spends $20,000 per year, his savings will only last him 5 years. Thus, he has 5 years' worth of wealth.

Not exactly enough if he stops working, right?

Compare with Mr B, who has a small business generating $20,000 in net profits annually, has $50,000 in the bank and spends $20,000 per year

Technically speaking, Mr B has infinite years of wealth. As long as his business keeps going at the same rate, he does not have to work a single day of his life! That's true wealth! (In fact, his wealth has reached the stage of financial freedom, which I will write on in the future posts.)

Okay, back to the investors. So as you can see, one may be able to make tons of profits from investing and trading. But if the profits are not kept, reinvested, and automated, it may still be depleted one day. (I've ever heard of people using their profits to buy stuff. Kind of defeats the purpose of investing right?)

That brings me to the other important aspects of wealth management: Savings, System and Security. But I shall touch on them on the upcoming posts. Meanwhile, digest on the above pointers, and I'll be back :)