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kv Blogs
 tej kohli
14 November 2016

Barriers to Entry: Why Wealth Begets Wealth

It seems like some people have all the luck. While most of us work day to day, scarcely managing to save enough for our twice-yearly holiday to Magaluf, the super-rich are jet-setting around the world, enjoying the billionaires’ lifestyle and (seemingly effortlessly) enjoying the returns of successful investment after successful investment. Whether it’s tech billionaire Tej Kohli (net worth: an estimated £4.5 billion) reaping the rewards of another successful solar energy investment or Mark Zuckerberg (net worth: a cool $56.6 billion) acquiring yet another trendy app or website, the high net-worth individuals of this world just seem to get richer and richer. But why is this, and what can we learn from them?

Investing Like the Super-Rich

In certain cases, of course, wealth can be inherited – allowing individuals the best possible chance of success. But for ultra-high net worth entrepreneurs, like Tej Kohli and Marc Zuckerberg, it seems to be more a case of taking the fortune they have earned and letting it blossom into a whole bouquet of rewarding investments. But how, and can ordinary people copy their technique? The answer is yes and no – ultra-high net worth individuals can make huge amounts of money by investing in high-risk investments like airline leasing and new businesses. These investments have more chance of going sour, but they also offer much larger potential rewards than the ISAs and bonds us norms put our spare cash into when we can afford to– and if you’ve got that much money to lose, you can afford to have the odd gambit go belly up.

Another trick of the super-rich is to make long-term investments, such as closed-end funds, where their money is tied up for at least five years. These allow the opportunity for huge long-term gains – but require a large capital sum of investment, and most people simply can’t afford to wait such a long time for their money to be returned. Property, of course, is another prime investment for the wealthy – but with many of us struggling to maintain even our own homes, buying up luxury developments in key cities may be off-limits for most of our readers.

Making What You’ve Got Work for You

Ok, so maybe copying the super-rich is a little, well, rich for your tastes. But it’s still true that wealth begets wealth – as anyone who has ever been fortunate enough to get their hands on a lump sum of cash knows. By starting saving as much as possible from as young as possible, you too can benefit from the secret bonuses of amassing money – your nest egg will help you to avoid the Tk_Image_03
sometimes harsh charges levied on the less financially able, such as renting accommodation and cars, and avoiding bank charges and fees on debts. It might help you to begin calculating your net worth on a monthly or three-monthly basis – with the goal being to ensure you are increasing, rather than decreasing it, every month. You can do this by writing down the sum of your assets in one column, and the sum of your debts and expenditures in another. Subtract the second from the former, and you’ve got your net worth – and if you can increase it every time you calculate it, you know you’re on the right path.

It may seem unfair that wealth begets wealth, but just because you have less money doesn’t mean you can’t save your way to success. Be patient, be diligent and think about your long term interests – and maybe one day you’ll have saved enough money to invest like the super-rich yourself.