When you are in your 20s and 30s which is the biggest asset that you have?

House? Car? Mutual funds? No. None of them. Then what is it?

It is your future earnings. In Finance terms the NPV of the future cash flow of your earnings. Let us say you are a CA and are in the process of doing your CFA from the US. Your current salary is Rs. 9 lakhs per annum and you will end up at a salary of say Rs. 3 crores per annum at the end of your career assuming everything goes fine.

I am sure you can put it in an excel sheet and find the NPV. So concentrating on this (hence doing CFA), protecting it (term insurance Rs. 5 crores over a period of time, start with Rs. 1 crore today) and making sure that you are in the optimal job is your FIRST WEALTH CREATION STEP.

The job need not be the best paying, but it surely should lead to a lot of learning. This is because you are laying the academic and practical foundation to a high income. Sure you should be doing your SIP, making sure you have cash for the short term needs, buying a health and term insurance, etc…..but concentrating on your learning, and laying a foundation for earning is THE MOST IMPORTANT JOB TODAY.

This extremely important asset should be assessed regularly (and for heavens sake not by peer comparison alone), and steps taken to enhance it. Remember it deserves all the respect of being the 98% of the portfolio value!

If you have a job in a government organisation, it is like a debt instrument. Sure growth, nothing spectacular in cash terms, but sure pension….so your portfolio has to be in equities. See ultimately your asset allocation has to take into account the NPV of your job. As your age increases you need to increase allocation – after all the NPV will keep falling as your age increases. If you are a businessman and have uncertainties in your business, your investments should be in less volatile assets like PPF, nsc, bank deposits. Sure once you reach a pre intended level you have to be in equities, but the start could be in debt.

So go out there get a great degree (the IIM is still a great place to get  degree from – but only A, B or K, in the current year I know the others are struggling with placements) or an Ivy League school. It is not a bad idea to pick up 4-5 years of experience and then get into ISB, Hyderabad….if you are serious about a corporate career.

Then go and learn corporate politics, know whom NOT to antagonise in the field in which you are, and encash your NPV. God bless.