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What Is Wealth Creation?

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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 29 March 2018
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Wealth creation is the process of building up assets and resources for personal enrichment. Many nations encourage wealth creation among their citizens with the argument that it leads to a better quality of life and more individual autonomy. Citizens with personal wealth are less dependent on social resources and may in turn contribute resources to society through charitable works, job creation, and other activities. There are a number of approaches to wealth creation.

To build up assets, it is necessary to have something to start with. Wealth creation works best with a seed investment that will allow the individual investor to invest diversely and start accumulating funds for more investments. Some people may start businesses, begin trading in stocks, or purchase assets like real estate. For example, the investor might buy a home in need of some work at a low price, fix it up, and resell it at a higher price, pocketing the proceeds and paying off any outstanding debt on the loan if she used a mortgage for the purchase. Using her profits, she can repeat the process, gradually acquiring more valuable real estate and building personal wealth.

This can be a slow process, especially if an investor makes mistakes or starts with limited funds. Over time, wealth creation can become more complex as the investor starts to think about issues like taxation and managing investments for long-term returns. Diversification is a common aspect of wealth creation, as investors want to avoid situations where their investments are tied up in a single asset. The real estate investor above might also, for example, invest in a development company and place money in mutual funds or in the care of a brokerage for investments in stocks and other securities.

Work will provide income people can use for wealth creation, and it is possible to slowly build up wealth simply by depositing earnings into savings and keeping expenses well. This will not result in the accumulation of substantial wealth, however; it is necessary to make investments, sometimes risky ones, to build wealth. Financial advisers can provide assistance to clients who do not know how to invest safely and wisely, or want guidance to make sound investments.

One of the goals of wealth creation is to create an estate to leave to survivors so they will be comfortable. Entrepreneurial heirs may build the estate over multiple generations, creating a reserve of family wealth. This money is available to draw upon for a variety of investments as well as activities like charity.

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fify
Post 3

@burcinc-- I don't have that information but I do know that 75-80% of the wealth in America belongs to the richest 10% of Americans. I think you can infer the information you want from this statistic. Most of the wealth is in the hands of a very small group. So most Americans do not have any considerable wealth and they are unable to create it.

It makes sense though. How can the middle and lower classes working on minimum wages possibly save enough money to make a worthwhile investment to generate profits? Most people can't even make ends meet every month without resorting to their savings or credit card.

burcinc
Post 2

Do we have any information on what percentage of Americans have succeeded in wealth creation? I think it would be interesting to see this. I personally don't think that the number is very high. It probably was high when America was first established since land was up for grabs and many colonists got rich mining.

ysmina
Post 1

Wealth creation does take a long time and it has its risks, especially when it comes to investment. "Don't put all your eggs in one basket" is a great idiom that anyone interested in wealth creation should follow.

A friend of mine lost a great deal of money because he invested it all on one company. When that company failed, he lost his stocks with them and was left with nothing.

It is considerably more work to distribute wealth by investing it in various industries and places. But it reduces risk and prevents great losses. I believe everyone who has a good amount of wealth has followed this general rule.

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