How to earn a million in a hurry? Start with a billion

Just a handful of strategies are spoken and written about in the quest for wealth creation. These are oft-repeated slogans of buying low, holding on, having patience and letting compounding work for you.

Yet, in our world of short attention spans, many more ways exist to destroy wealth. These tools of wealth destruction pack abundant excitement. Let's explore some of these ways that promise to diminish your capital.

Derivatives: It is awfully boring to buy long, and that too till perpetuity. What if you want to buy but have no money? Do not worry. Listen to a couple of market gurus who know exactly what will rise and by how much. Take leverage at the click of a button from your broking app. Buy derivatives and take a position multiple times your net worth, and then wait for that lucky minute when you make money. However, if it does not work in your favour, you are one step closer to bankruptcy. Just imagine the adrenalin rush you would have to see the ticker move. No other thriller can keep you on the edge of your seat.

According to research conducted by SEBI, 89 per cent of investors have lost money in futures and options (derivatives). Despite that, the volumes are astronomically high, hoping to be a part of the lucky 11 per cent.

But as investment guru Charlie Munger once said, "There are three ways a smart person can go broke: liquor, ladies and leverage."

Cryptocurrency: Two years ago, we saw more crypto ads between IPL matches than the matches themselves. If crypto platforms earned as much to get premium telecast slots, just imagine the potential it had for investors. Ignore a few names like FTX's FTT (the most recent one), Luna, Pincoin, etc. (that list runs long), the business still seems to be thriving. How else could you fund nefarious activities? There is no regulation and no trail of how cryptocurrencies are used. Other than El Salvador, no country has acknowledged it as a legal tender. This investment would have the potential to wipe you out financially. How thrilling would that journey be?

Finfluencers' stock tips: Let's look at stocks now. I recently met an 'evolved' stock trader. He gets tips for stocks that deliver 70-100 per cent return in the shortest possible time (less than a quarter). He is fully confident of his network of skilled Samaritans and has little faith in more organised vehicles. I wondered why the influencer (read Samaritan) did not bet everything he had on the tips he spoke of in front of naive people.

Hunt for such Samaritans. They are a dime a dozen and love to brag about their knowledge of the market. The way you adopt a religious guru, adopt a financial guru who will help you sail through this journey from riches to rags. It will, for sure, give you a high.

"There are only two kinds of investors: those who don't know where the market is headed, and those who don't know that they don't know. Then again, there is a third kind: those who know they don't know, but whose livelihoods depend on appearing to know." - William Bernstein

Timing the market to perfection: All SIPs consider a decade or more long investment for wealth creation. Meanwhile, there are a few who find SIPs boring. These market gurus can predictably get it right most, if not all the time. Why should I be passively investing when I can outsmart the fund manager? If you follow one such soothsayer, you will rebalance at regular intervals and switch from one scheme/asset to another. This way, at least at the start, you will have all winners (as seen in the past performance) in your portfolio. Even if you pay short/long-term capital gains tax, the excitement and the ability to look more intelligent than the best brains will give you the adrenaline rush. What could be a better option?

Building wealth is different from getting rich. It is boring and demands patience. But what takes years to make can be destroyed in a couple of days, hours or clicks.

As I delve into further research on wealth destroyers, remember that a few ill-advised actions could obliterate your financial foundations entirely.

Shyamali has been navigating the asset management world for over 20 years, working with everyone from the seasoned super wealthy to absolute beginners. She has a knack for understanding the human side of investing and empathising with investors, something that shines through in her writing. She can be reached at [email protected]

Also read: Greed, prudence and lessons from history