Optician | Posted on | Share-Market-Finance
How do billionaires use other people-s money to grow their empires?
Project Manager at The Economic Times | Posted on
Why blame billionaires. I, you or anybody else may use money to grow their money to build our own empires. You just need to know the right ways and you must have enough appetite to take risks. Managing money, especially other people’s money is one of the toughest jobs in the world.
Let’s understand with the help of an example. Imagine Rohan Sharma buys a property in Noida for Rs 1 crore. He took Rs 80 lakh as loan from some bank, while paid remaining Rs 20 lakh from his savings. After a year or so, he sells off his property for Rs 1.20 crore considering he gets an appreciation of Rs 20 lakh. He pays back Rs 80 lakh to the bank and keeps the remaining with him. Let’s assume, he had paid some interest on loan and other charges during exercise. Let’s keep Rs 5 lakh for all of that.
So, Rohan’s initial investment was Rs 20 lakh.
He paid for bank loan and other trade-offs were Rs 5 lakh.
His appreciation on home was Rs 20 lakh
Hence, his total profit stands at Rs 15 lakh + he still has his Rs 20 lakh intact.
This situation is very superficial but this is what billionaires do with all the money they collate from different sources. They invest their money in assets that can give them maximum mileage. Sometimes, their decision of investment brings them castle while sometimes it fails abruptly. It’s all about making right choices and decisions. Imagine if Rohan’s property would have depreciated by Rs 30 lakhs of so. He would have made a big losses.
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