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How is wealth created?

wealth creationAs a Certified Financial Planner™ professional, I’m often asked by women how investments work, and why they should invest outside of a savings account. Without a clear understanding of why you should invest in a company in an attempt to make a profit rather than putting money in a savings vehicle like a CD, it may be easier to take the path of least resistance. Let me explain. The bank or credit union pays you one quarter of a percent (or less) on your deposit, which is in essence a loan to the bank, and they loan money out to others at 4% to 5%. You may get a bit more on a CD, but that, my friend is capitalism. A savings deposit pays one quarter of a percent (.25%) to the loaner (you); and 4.75% to the owner (the bank). In order to accumulate meaningful savings, it is often necessary to take on some investment risk.
So that leads to the question:

How is wealth created?

There are four things required in order for wealth to be created.

1. Financial capital or money. Money is necessary to be invested in order for a company to manufacture a product or provide a service for a profit.
2. Natural resources. Oil, gas, land and gold and other commodities are assets that can be used in creating products.
3. Intellectual capital. A great idea or a new way of delivering a product or service is an example of intellectual capital. Think Apple i-Phone or the Google search engine.
4.Skilled labor

creationsWhen all four of these things come together, wealth is created. If we provide capital to a company through investment of our money, that entitles us to a piece of the wealth created. Investing, in its simplest form, is saving a part of what you earn, having an investment philosophy or discipline and a road-map, and paying attention to the cost of the investment. If you’re not sure how to proceed, engage a Certified Financial Planner and they will help you make a plan. Don’t wait for your husband or your father or some other man in your life to do this for you. You are capable and qualified to do this on your own.

Note: Due to industry regulations on communication, we are unable to allow for public comments on this blog. Please feel free to email me your questions and/or comments to kathy@fishandassociates.com. Thank you.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Fish and Associates. Kestra IS and Kestra AS do not provide tax or legal advice.

This site is published for residents of the United States only. Registered representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact the Kestra IS compliance Department at 512-697-6000.

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