It is said with a lot of data by the Commies, Socialists and the Congis that the ‘rich are getting richer’ and the gap is widening. Have you wondered why?

Is it because of some policies of Narendra Modi? No Joker, it is not. It is clear simple math.

Let us take the case of a family with Rs. 10 crore equity portfolio, an EARNED income of Rs. 25L, family expenses of Rs. 10L, and a dividend income of Rs. 30L.

What happens at the end of a year. Let us assume that the equity gains for the year was 15%, and they created a 10% trading income on the portfolio.

At the end of the year their position would be Portfolio of Rs. 12.5 crores + further investment Rs. 45L.

A richer person has far greater ability to take risk. Sure there is no need to take risk, but can take substantially more risk to earn a higher return.

A richer person can stay calm in a falling market for far longer than a person with more limited means. This is one of the most important factors necessary to create wealth – not interrupting the compounding.

A richer person KNOWS that he will be an INVESTOR for the rest of his life and this wealth is ONLY going to be handed over and is not for immediate consumption. This allows them to take 30-40 year calm view on their portfolios.

They work real hard to create wealth, and NEVER REALIZE their income. So they pay tax much later. For example a middle class person may keep money in a bank fixed deposit and pay 30% IT on interest on an annual basis. A rich man will keep it in a debt fund and pay tax after 24 years. See the tax saved? I had done an article saying “the rich neer REALIZE their income”. They postpone and later bequeath!

They work real hard in their lives to crete a secondary income aka passive income. It is not easy, but it is an art they are born with.