Well, this thought might have infiltrated your mind when you started with the millionaire dilemma. What would be the debt – assets profile of a millionaire? Do they even have debts? Most would land on a conclusion that million dollar status means having zero debts and lot of assets or equities. But in reality, it is not very true. Even the global billionaire Microsoft Corporation took a loan back in June for purchasing LinkedIn. So one must understand how the million dollar chaps keep their status as such even when both debts and assets are prominent on their balance sheet.
Understand debt: – A debt is a sum of money borrowed from a source, with a custom norms of repayment. The repayment is subjected to X% interest. Not always money is borrowed to keep the heads above water. Even billion dollar companies follow the strategy in order to keep the risk lower. The idea is simple, keeping risk lower by not making a bulk investment from the assets or savings, rather raising fund by loan and repaying it from the profit. If else profit is not made the loan is confronted from assets. Also, certain tax waivers are possible with this strategy.
Equities are shares or worth’s that a person or company holds, which usually belong to another company. In a common millionaire strategy, a person always keeps his assets in the drawer and equities stake as the primary source of revenue generation. Most probably a part of assets is always kept liquid for meeting urgent demands, whereas rest is turned into non-liquid form, usually as some kind of investment. Most trusted form of investing is a bank share, but a recent trend shows an increase in gold, oil etc. Real estate is currently the market leader among millionaires in safeguarding their non-liquid assets. But the scope for innovation has left open a meadow of ideas, it’s that part that really determines your growth!