Time to tap your own enterprise to make wealth Given the uncertain macro-economic environment, rely on your own abilities to earn an income

The optimism about India is at an all-time low among investors. Investors are no longer sure how long they may have to wait to earn double-digit returns on their equity stocks. In our obsession with the macro picture, we may be overlooking other ground realities. There are opportunities galore, not in investing in other enterprises, but in the possibilities of our own incomes. 

    My neighbour is a retired bank officer who loves to travel to new and exotic locations. She does not fund this goal through an asset allocation for her retirement corpus. She comes up with new ideas every year for children of working women. Batches of young kids learn to cook, knit, sew or simply make paper bags with her. The fee she charges for the two-month workshop in April and May is used to fund her holidays in June and July. She has been doing this over several years and does not care about the stock market. This year she has more kids than in the last three, and laughs when I tell her that the market is down. The opening up of the Indian economy has meant that opportunities to earn have expanded immensely. Several enterprising individuals have grabbed these with both hands. 

    The children of my maid and driver are studying in English-medium schools. They aspire to become engineers and management professionals. While they empathise with their parents' hard work, they aspire for a life far better than that of their parents. Social scientists point out that the countries where the next generation hopes to do better than the previous one tend to enjoy sustained growth and prosperity. My maid and driver do not know which IPOs succeeded or failed, but are confident that they have made the right investment in their kids. 

    The taxi driver who has been dropping me to the airport for so many years, went on to create a dial-a-driver service for partygoers. They use cell phones, a superb resource allocation strategy that ensures the driver reports to you at the promised time, each time. Several new, unheard of services include teams of teenage boys, who scrub and clean your apartment over the weekend; personal shoppers, who send you MMSes for instant approvals. These entrepreneurs have not heard about the Greek crisis or the falling rupee, and it's unlikely they will care about these. 

    What is the common thread in all these cases? The focus on deriving income from economic opportunities. Those of us who are looking at the stock market know that when we invest in stocks, we are investing in other people's enterprises. This may be only a part of the story of opportunities that a growing and developing economy like India offers. The other real and all-pervasive opportunity lies in the million simple income-enhancing ideas tapped by enterprising individuals. 

    The objective of an investment portfolio is to create an alternate and additional income-generating asset, which can support and replace the income stream from our jobs. We lend our capital to others to use and earn a return from it. Even before we depend on the ability of others to utilise this capital efficiently, it may be worthwhile asking whether we have optimised the use of the human asset, or considered enhancing our income in the context of the growing possibilities. 

    A retired investor's financial plan need not be about protecting capital, earning interest income, or investing a portion in equity. It should be about the potential for an alternate income in the first 10-15 years when health and energy levels are high enough to be put to productive use. A young investor need not speculate on stocks and derivatives to earn a chance gain. It may be worthwhile considering a moonlighting opportunity to tend a bar, write online content, chip in to manage events, or double-up as a DJ. 

    The breaking down of barriers in the various opportunities to earn an income makes it possible for failed entrepreneurs to return to work, young earners to change careers, young parents to work from home and for others to make mid-life course corrections. These profitable pursuits are not reflected in the loan books of banks or return from investment portfolios. They are visible in the consumption boom around us. The new confident optimisers of income and human asset potential are buying durables for their homes, eating out, taking holidays, and spending on their wardrobes. They integrate into the macro-economic cycles and numbers indirectly. 

    To earn, save, plan and systematically invest is the traditional approach to enhancing wealth. This relies so much on the efficient use of capital by large businesses. In an environment, where large enterprises are at risk from government policies, lack of reforms, crony capitalism, and international shocks, wealth lies in simpler endeavours. There is no need to throw the optimism about India out of the window. Perhaps shifting sight from the macro to micro will be adequate. 

    —The author is Managing Director, Centre for Investment Education 

    and Learning, and can be reached at uma.shashikant@ ciel.co.in