Unconventional thinking is THE most powerful weapon in creating everlasting wealth. In other words, to become wealthy it is critical NOT to be satisfied.

I am not saying that you must be dissatisfied with your life, so much so that you get stressed. Oh no! Instead, be ambitious. We take you through two smart investment strategies to help feed your monetary ambitions.

Strategy 1: Trade-offs

It’s pretty simple. You replace one asset in favour of another, which has more potential to create wealth. For example, move your investment from a Fixed Deposit, to say, a Public Provident Fund. It’s definitely a better treatment for your money.

You could move your money from PPF to say a Monthly Income Plan (MIP) of a mutual fund. Then go from your MIP to a balanced fund, from a balanced to a diversified equity fund, and then from diversified equity to a sectoral equity fund. And so on and so forth.

Giving a better chance to your money, naturally, creates an opportunity to treat you with better returns. An extreme example would be to have all your money only in real estate or in equity shares. Even this is not wrong; it all depends on how much you want your wealth to multiply.

Even if you had all your money invested in direct equity shares (perceived to be very risky) is also fine given that you know how to manage your portfolio. If you need proof of this, talk to some seasoned investors, over 50 years of age, who are not ‘traders’ in the stock market.

They will probably tell you how they amassed 5,000 shares of say Reliance Industries or Infosys. They did not buy it like an FII, but over the years they got bonuses, rights and dividends etc, in the process.

Strategy 2: Leveraging

Here’s another non-traditional concept, and the more risk, the better. However, there’s always a price to be paid. Basically, you place your existing asset(s) in the possession of a lender, borrow money and use that money to create a similar or even better asset.

For example, you could use your house as collateral and borrow money, then use these funds to buy another piece of real estate or use the money as down-payment. You could use your second home to generate rental income.

On the other hand you could use your insurance policy, shares or mutual funds, which you don’t want to sell for another five to 10 years as collateral and create an overdraft facility. Use these to invest in IPOs or buy shares or real estate. You could use any combination you prefer.

A word of caution: Tread VERY carefully and manage this strategy well. Or else you may have to pay a heavy price or even end up losing your present assets. It’s important to use one appreciating asset to create another appreciating asset. Never leverage with a depreciating asset, since the value will go down with time, like say a car, for instance.

Also, examine three things very carefully before using this strategy.

i. The impact of taxation

ii. Differing interest rates: This refers to the rate at which you will borrow vis-à-vis the rate of return that you will earn, plus capital appreciation assumptions. Of course, the latter needs to be significantly higher than the former and this happens best during a low or falling interest rate scenario.

iii. Analyse your cash-flow capability to service loans or overdrafts as the case may be.

If managed well, leveraging can generate huge payoffs for you. However, this is no strategy for the fainthearted!