How to Build Assets? What is the Process of Asset Creation?

Did you know that only a fraction of the world’s population truly understands the art of building assets? Picture this: more than 75% of people around us suffer due to the complexities of financial struggles. It’s all because they do not realize the importance of asset creation. In a world where financial independence remains an unknown goal, allow me to ask a bigger question. Why do some individuals effortlessly amass wealth while others continue to struggle financially?

The answer lies in demystifying the process of asset building.

Join me on a journey to uncover the significance of transforming our financial landscape. As we can understand more about the elusive art of asset creation, we can slowly liberate ourselves from the shackles of financial constraints.

This article can be your gateway to financial freedom. Let’s learn and welcome to the key principles of ‘How to Build Assets.’

There are easy ways to build assets with little money. But fewer people in this world can build assets. Why, what is the problem? The problem is that people do not know the process and importance of asset building. Hence it gets ignored. [Also check this free online Net Worth Calculator.]

What one must do? It is not rocket science. If one can understand the ‘process of asset building‘, the rest will be simple. What is the process of asset building? [Also read about the process of investing successfully.]

‘Invest’ money to ‘accumulate assets’.

Though the statement looks simplistic, to better understand it we must know the relation between ‘investment’ and ‘asset accumulation’.

If one can establish this relation in the head, the balancing process becomes much easier.


Online Net Worth Calculator

Use this net worth calculator before reading the article. It’s a tangible tool to assess our financial standing. As the article emphasizes the importance of understanding the asset-building process, this calculator becomes a practical companion. It allows its users to input their assets and liabilities for an instant net worth evaluation. This way it provides a real-time snapshot of financial health.

Future Asset Growth Rate (%)Future Liability Growth Rate (%)
Home’s Current Value (Rs.)Home Loan Balance (Rs.)
Other Property (Rs.)Personal Loan Balance (Rs.)
Jewellery (Rs.)Car Loan Balance (Rs.)
Cash (Rs.)Education Loan Balance (Rs.)
Fixed Deposit (Rs.)Credit Card Balance (Rs.)
Mutual Fund (Rs.)Other Loan Balance (Rs.)
Stocks (Rs.)
Endowment Plan (Rs.)
Retirement Corpus (Rs.)

Total Asset (Rs.)
Total Liability (Rs.)
Current Networth (Rs.)
Networth Worth After 5 Years (Rs.)

Point #1: Process of Asset Accumulation

How to build assets - 1
  • Investment: This is a process of buying assets. The purchased assets can generate returns over time. Read more about Warren Buffett’s 3 rules of investing.
  • Asset Accumulation: When assets are gradually acquired over time and held for pretty long term, assets start to accumulate. To make an investment process successful, one must buy assets with the intention of accumulation. Read more about the advantages of long-term investment.
  • Asset Building: It is the “process of gradual purchase of assets, with the purpose of its accumulation“. 

The important keyword for us is “accumulation”. Buying assets without the intention of accumulation is almost a meaningless activity. The focus must be on buying assets and their accumulation.

Now that you know the process of asset building, let’s ask a more basic question. Why build assets?

Point #2: Why build assets?

Do it for financial independence. What is the necessity? Let’s dig deeper.

How to build assets - income from job vs alternative income

Do you love doing your job? I know not many will raise their hands to this question. But if we do not love our jobs, why do we continue to linger on it? Because there is no choice.

To continue earning money, doing the job is a compromise that we have chosen voluntarily. But today a time has come where most of us are completely dependent on our job for the money.

There is a way to remove this dependency? Yes, there is a way. Become financially independent. How to do it? Follow this approach:

  • First, realize that you are financially dependent on your job. Most of the people who are in a job do not realize that there is a thing called financial independence. Know more about financial independence.
  • Second, start reducing your financial dependency step-by-step. What does it mean to reduce financial dependency? Generating an alternative source of income. An alternative source of income will come from where? From assets that one accumulates. Read more about investing for monthly income.

The bigger the asset base, the larger the will be alternative income. Larger alternative income means less dependency on income from the job.

So, build assets to liberate yourself from the clutches of your job. Make this your ‘priority number one’. It is a goal worth following.

Point #3: Why ‘alternative income’ is preferred over ‘income from job’?

We have more control over our alternative income. But the same cannot be said about the income from a job.

How to build assets - Job vs investment

Alternative income generation should always get priority over ‘income from the job’, why? Because of the roots from which they originate. To understand this, we will have to look deeper within ourselves…

Why do we need money? Mainly to support our standard of living and manage other living expenses. For a human being these expenses are basic and uncompromisable.

How do we ensure that these expenses are met? For most people, one has to work hard (like in a job) to generate an income. This income in turn helps us to meet our expenses.

But the problem is, our expense grows with time. Hence our income must also grow. So here comes the distinction between ‘income from the job’ and ‘alternative income’. How the income will grow in these two cases?

Income Growth (Two Cases)

  • Income growth in job: This income comes from doing a job and building a reputation for oneself in the company. It is the reputation that triggers ‘income growth’ for a salaried person. But reputation building is only partly in our control. Outside entities have a bigger say in reputation growth over time. Which means? We have less control over income growth in jobs. Read more about building millions in your first job.
  • Alternative income growth: This is dependent more on a ‘mathematical formula’. Hence it is more certain. Alternative income comes from accumulated assets. The bigger the asset base, the higher will be the passive income. The rate of income growth here is more dependent on your ‘skill’ than on other factors. Which means? We have more control over the growth of alternative income. Read more about building alternative income while on the job.

As we have more control over the growth of alternative income, hence it becomes our preferred income stream.

In the initial years, the quantum of ‘alternative income’ will be low (compared to job). But do not let it dishearten you. Keep on investing and buying more assets, alternative will grow.

Point #4: How a common man can build assets?

How to Build Assets -3

For already affluent people, their way to asset building is different. How a common man can start building assets? These are the three steps:

  1. Save: Saving money is more important than investing itself. The easiest way to save money is to put aside part of the income. Reducing needless spending will also increase free cash in hand. Even the richest men in the world have to save money to stay rich. As a rule of thumb, if one saves 25% of total income, it is called a decent saving. Give standing instruction to the salary account to divert 25% of the money to the savings account. This should happen on the first day of every month.
  2. Invest: Why to invest? Why not keep building savings, and then use savings to directly buy “assets”? This will be nice, but keeping money as savings is not advisable. Why? Because of two reasons, (a) savings get spent too easily, and (b) invested money multiplies faster. Where common men can invest in savings? Mutual funds, stocks, real estate, gold, etc.
  3. Lock Funds: This is the most essential step. Generally, we stop at step two. But we must take this extra step. In this step, we are converting ‘all assets’ into ‘income generating assets’. How we can do it? My best avenues are (a) dividend-paying stocks, (b) rental properties, and (c) REITs.

The whole asset-building process can be realized by following the above three steps. There is nothing new that I have told, but what is worth remembering here is the chronology of the steps and step #3 itself (Lock Funds).

Let’s discuss slightly in more detail about how we can successfully implement the above 3 steps:

#4.1 Save Money

It is important to save money in the right way. The target should be to save sufficient money which can later be diverted to buy investments. How one can save money? In the following ways:

  • 1.1 Build Emergency Fund: Nothing eats our assets faster than an emergency. When emergency strikes, money gushes down the drain. Example: a medical emergency. Hence it is advisable to keep a sufficient backup, to handle emergencies. Emergency funds must be composed of at least 2 things: (a) insurance and (b) cash. Read more about where to keep emergency funds.
  • 1.2 Put Funds in Recurring Deposit: In this step, the priority is to save money. Do not think about returns here. Recurring deposits have a few clear advantages: (a) saving is automatic, (b) money is safe, and (c) Money remains in front of our eyes (bank). Read more about recurring deposits here.

Please note that in step 1.1 we are ensuring that we are well prepared to meet emergencies of life. When it comes, we can find refuge in our savings.

In step 1.2, what we are saving will be used further for investments.

#4.2 Invest Money

The savings accumulated in step 1.2 must be invested wisely. But the problem that common people face is a lack of investment know-how. So in a case like this, where one can invest money?

  • 2.1 Hybrid Funds: SIP in hybrid funds is a useful tool for investment. It has multiple benefits. It can give exposure to equity and debt from a single window. Think of your SIP like this, ‘I will continue investing in this fund through SIPs till eternity’. Yes, this should be the mindset. Keep purchasing units of mutual funds month after month, without a break. This money will be eventually used to lock funds. Read more about types of mutual funds.
  • 2.2 Index ETFs: Exchange Traded fund (ETF) is another excellent investment product. ETFs carry with them the advantages of both stocks and mutual funds. ETFs offer great investment diversification within the equity portfolio. Every time there is a 3% or more dip in the index, try to grab a handful of ETF units. Read more about ETFs.
  • 2.3 Gold: Gold is a decent long-term investment vehicle. When I say long-term, I mean a minimum holding time of 10-12 years. The price appreciation of gold is not as predictable as equity. But in time bands of 10 years, gold price appreciates decently. For example: in the last 65 years, gold prices increased every 10 years. In the long term, it beats inflation. Read more about gold investment.

Gold Price History (10-Year Time Bands)

SLYear Band of 10 YearsCAGR %
72018-2024 (Feb)12.96%
  • 2.4. Buy Land: Land is an asset that is becoming more and more scarce. Consider the case of cities like London, New York City, Los Angeles, Paris, Tokyo, Mumbai etc. Probably, a piece of land in these cities is the rarest of rare items. One great idea of investing in land is, to keep buying land ‘just on the outskirts’ of important cities.

In this step what we are doing is to give a faster multiplying power to our savings. The investments discussed above can generate good returns over time, with less risk. But please note that the investment horizon should be more than 5+ years.

#4.3 Lock Funds

The money locked in RD, SIP, land, etc is all done with one objective. At some point in time, it should be redeemed to ‘buy an asset’. Which asset? Income-generating assets? See the following:

  • 3.1 Dividend-paying stocks: These stocks are fundamentally strong stocks that also pay regular dividends to their shareholders. It is important to buy these stocks at the right price, or else their yield will be too low. Hence, waiting for the right time to grab the best dividend-paying stocks is essential. Read more about dividend-paying stocks here.
  • 3.2 Rental Property: For me, this is the best income-generating asset. Why? Because it is one asset that generates the best passive income. The rental yield from a real estate property also increases at a rate of inflation. Read more about how buying your first home is a great investment.
  • 3.3 REITs: This is a new income-generating investment vehicle launched in India in Mar’19. In America and Europe REITs are one of the most preferred investment vehicles for income investors. Read more about REIT India here.

One must equally distribute one’s investment among the above three options. These are great investment vehicles for income generation.

Remember this infographic…

How to Build Assets -1

Throwing money here and there in the name of investment is not enough. Investment is only one leg of the asset-building process. The asset building stands on three legs:

  • Investments
  • Gradual Accumulation of Assets
  • Holding these assets for very long periods.

Jointly, all 3 legs in tandem can build assets over time. 

Try to take a print-out of the below simple-looking photo and paste it on your work table. I believe that this simplistic picturization of ‘asset building’ has the power to change the lives of people.

Point #5: A Real-Life Example

Allow me to narrate my own story to you. I’m sure it will highlight the transformative power of strategic financial planning. About 18 years back I started feeling trapped in the monotony of a 9-to-5 job. During those days I first read about the concept of financial freedom. From that moment on, I’ve started to plan and unshackle myself from the constraints of traditional employment.

How it all happened organically (step by step):

Step #1: The Starting Point

It all started with a realization that a job is merely a means to an end. I wanted to lead a life on my terms, but then there were issues related to my work schedule, expectations of the boss, peer pressures, etc leading to work anxiety. My dependency on the salary from my job was so much that I was feeling trapped. I wanted to do more in life but was stuck in the rat race.

The way to get out of this rat race was to achieve financial freedom, and to get there I realized that I must start taking the first crucial step toward asset building.

Step #2: Strategic Saving

During those days I was reading this book by Robert Kiyosaki which helped me build a perspective about financial freedom and the need for asset building. From this book, I picked that the new path should start with saving money regularly from my monthly salary.

I diligently set aside a good portion of my income. Initially, it was not easy to save as I used to spend nearly 100% of my income. But with time, I could develop a savings habit. I used the cash savings to first build an emergency cash fund. Three months’ worth of expenses was my target.

Once I created this cash reserve, I took the next steps related to strategic savings. I used the extra cash to buy insurance policies (term plan, decent health cover, and motor insurance).

My emergency corpus, cash plus insurance, not only protected my assets but also allowed me to withstand economic uncertainties.

Step #3: Intelligent Investing

Embracing the world of investment, I navigated through various options. I started with mutual funds and continued with it for a few months. Over time I realized my special liking for direct stock investing. I liked the whole process of fundamental analysis of businesses and eventually buying good stocks.

I also realized the necessity of keeping the investment portfolio well diversified. Thereon, I strategically started diversifying my portfolio.

I used my savings to also accumulate Gold ETFs, Real Estate Investment Trusts (REITs), and physical properties.

Step #4: The Turning Point

As the years rolled by, my investment portfolio matured, and the seeds I planted began to bear fruit. As capital appreciation started to become more visible, I began to book profits. Small-cap risky stocks were the ones that I sold first. These are the stocks that turned multibagger first. I remember that the first stock that I sold gave 5X returns in about 3.5 years.

The sales proceeds from these small-cap stocks I used to increase my holding of income-generating assets like dividend stocks, REITs, and rental properties. Just to balance my portfolio matrix, I also started accumulating fixed deposits with monthly payouts.

Income from these asset bases became a potent source of alternative income. A time when this income gradually became comparable to the earnings from my traditional job.

It was at this point that I decided to leave my job and became a full-time blogger (read more about me).

Step #5: Financial Independence

Fast forward to the present, I’m still not financially independent. But it is true that in 2006-07 this was a goal that looked more like a dream. In 2024, I no longer do my 9-5 job and my asset base is also growing. Financial independence is no longer a dream for me, it is not something that looks very achievable.

No longer bound by the chains of a 9-to-5 routine, I enjoy my path to freedom. I decide my work schedule, pursue passion projects, and explore life beyond the confines of conventional employment.

Point #6: Two Challenges To Asset Creation

Many believe that significant wealth is a prerequisite for asset building. Hence, people who are not so well off are discouraged from starting the journey. But the fact is, one can start small and still reach the goal. One of the better ways to build a substantial asset base is using step-up SIP. Remember, consistency and time can turn modest investments into substantial assets.

The biggest challenge of asset creation is time. It takes time to accumulate assets and it requires even more time to convert them into substantial wealth. People are often caught procrastinating and delaying the start of their asset-building journey. Such people often think that there’s always time. But if the idea is to get affluent, we must give at least 20 years for our invested money to compound. Hence, start as early as possible. Procrastination will only delay the potential for financial independence.


Is there anything more important than ‘building assets’? Yes, there are two:

I feel that, unless one has achieved the above two goals, venturing into asset building will not be effective. 

So before venturing into ‘asset building’, make sure that you are debt-free, and also have a big enough emergency fund protecting your back.

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28 Responses

  1. Hi Mani,

    Very well written article. But I don’t understand why should we Lock the funds in income generating assets rather than just keep it in growth Asset ? Assume that I have 80L in stocks/mutual funds. Rather than put this all into a fixed income debt fund that will give me 6% p.a. (i.e. 40k per month) or rental property; isn’t it better to leave it in equity. This will give me a much higher ROI of ~12% over the long term (assuming corrections over the short term too). For monthly exps, I can sell units as and when required. Wouldn’t this be much better than just 6% ROI?

  2. Excellant article outlining the general approach and tendency towards financial life. This helps for common people to improve their financial literacy.

  3. Awesome things here. I’m very glad to peer your article.
    Thanks so much and I’m taking a look forward to contact you.

    Will you please drop me a e-mail?

  4. Hi Mani,

    great piece of content. I liked how you emphasized the importance of locking the funds into the investment over the long run. Some people think that they can just throw money at an asset and it’ll start generating tonnes of income right away. The power of compounding over the long run should never be underestimated. Keep up the great work and look forward to reading more awesome content. Cheers.

  5. Hello, yes this paragraph is truly pleasant and I have learned lot of things from it regarding blogging.

    1. Hi Mani ,
      I went through the above article and few other articles as well , I really appreciate your insights which have been explained in a lucid and easy to understand language . In the above I agree to most of the points , but I have difference of opinion on the strategy you have suggested for the passive income . I believe , till the time you are generating income through your regular job one’s prime focus should be on enhancing the investments by making them work hard . One must invest in high quality direct stocks or invest through mutual funds . The yield that one gets through dividend stocks or through property is quite low . Once you know the amount you would need to lead the same lifestyle then one can shift gears and move the money towards tools which would give monthly returns e.g. SWP , debt funds , etc . This way one can be aggressive when one is saving and once he reaches the target amount ( e.g. 1 cr= 60 k / month ) which is sufficient for him to fund his / her lifestyle . As a thumb rule one can expect 60 k per month through 1cr of investment in debt tools so planning can be done basis the current and future needs . So if one needs 1.8 / month then he needs approx 3 cr . Reaching this amount of 3 cr can be done quickly through equities vis-a-vis other available instruments,

      1. You are right, but your approach is suitable for people who prefers to continue to do their 9-5 job till their official retirement age. The approach of this article gives a food of though to those people who would like to retire early from job (say at 45 years of age).
        Thanks for posting your view.


  7. Hi,Dear.Very useful article.As you said here,that dividend paying stocks are supposed to buy only in a right price.But we gonna do that basically for eternity.Therefore,I have a question which bothers me.Why we need to buy just in a correct time if dividends will cover all our expenses to that stocks?

    1. Timing the purchase (low buy price) will ensure a high dividend yield.
      Thanks for posting your comment.

  8. This simplifies for me important concepts I have absorbed from T.H. Eker’s “Secret of the millionaire mind” and importantly R.Kiyosaki’s “Rich dad, poor dad”. This article is so workable and will definitely spur me upwards. Thanks Mani

  9. Every word in this article is worth millions !!

    I thank the author from the bottom of my heart for writing such an “eye opener”.

    If followed, the advices covered in the article , then it will be a life changing.

    Once again Thanks to the author.

    *Request for a soft copy of this article so that I can read it daily.


  10. Thank you so much for your wonderful article and time spent for writing it.
    Definitely an Eye opener for all.

    Everyone must have book “Rich Dad and Poor Dad” in their library.

  11. Thank you! I was wondering how can I implement Robert Kiyosaki’s budgeting advice and your take on it might work for me too.

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