How Can I Become a Millionaire Quickly?

Actual Question:

I am 22. What can I do to become a multi-millionaire in the next 25 years?

I am a realist. So I am very cautious when I buy something. I read annual reports of companies, look at financial statements and calculate my intrinsec value of stocks. I beated the market (no leverage) in 2 years of experience. But getting rich quick is a dream. Should I keep investing in stocks?

Answer:

Dear Friend!

I am extremely glad to know your approach a in investing so far. I am also glad to know that all this you have achieved at such an young age! But you say that getting rich quick had remained a dream. My friend, let me assure you that getting rich quick had remained a pipe dream for a vast number of people in the past and will remain so in the future also.

My guru Warren Buffett says, “Certain things take time in life, and you cannot do anything. You cannot get a child in one month by making nine women pregnant.”

Why is it so?

What actually creates lasting wealth is not the investing acumen - but simply time.

Graph Depicting the Miracle of Compounding

You can see how the line is climbing steeply after 30 years!

In reality, a very long time and the miracle of compounding are the vital ingredients behind immense riches and wealth.

Even Warren Buffett, one of the richest men in the world today could only build his immense wealth only over 35 years. Please see the following table which shows how investing humble sum of Rs.10,000 every month in stocks can produce immense success over a long time.

So my sincere advice to you, my young friend is that from your own words you are on the right track and doing extremely well. Just keep it up for the next 38 years and by 60 you must be an unimaginably rich and wealthy person.

Thank you,

Anand

What are Current Assets?

Meaning:

The current means present, immediate, recent and so forth. Therefore, current assets are those assets that are meant and expected, to be converted into cash in an operating cycle quickly or immediately. In the accounting parlance one year is the accepted time period. Therefore all the assets that are expected, to be converted into cash within a year are called current assets.

On the other hand assets that are meant to be held for a long period or for period exceeding one year are called fixed assets or non-current assets.

Examples of current assets:

1. Cash and bank balances
2. Trade receivables also called sundry debtors
3. Inventories or stocks of raw materials, semi-finished and finished goods, consumables, spare parts, etc.
4. Temporary loans and advances that will either be returned or charged to expenses within a year, etc.

Examples of Various Current Assets

Importance/ Significance:

Holding adequate current assets in various forms is both inevitable as well as mandatory for the smooth and uninterrupted operations. Additionally, holding adequate current assets is vital for the liquidity of the organization, meaning ability to make timely payments to suppliers and meeting expenses. Employing adequate current assets thereby improves the current ratio - another important financial indicator.

Having emphasized the need for adequate current assets for the short term health of the company, excess current assets is not a good sign, indicating inefficiency of the operations.