Getting rich quickly and building lasting wealth often hinges on one of the following four basic methodologies:

• Using leverage
• Getting in on the ground floor of an investment
• Building & Selling your own product
• Compounding

Let us talk about each one in some detail:

Using Leverage

A lever is a device that is used to lift heavy objects with relatively little force. In the world of business and investing, it implies that very little of your actual cash has been invested, but you will benefit hugely if the investment goes your way (which generally means Up!). Common examples of this are:

• Real Estate - Your down-payment may be only 10% of the price of the house, but if the value of the house goes up by 5%, all the gains are yours to keep! Simple example: House value at purchase time: $200,000. Your money invested: $20,000. House value after one year: $210,000. Gains: $10,000. In effect, you have just made a 50% return on your money in one year of investing in a house! This is one of the reasons why real-estate investing is such a popular topic amongst  individuals of all background!
  
• Buying on the Margin in the stock market - Margins are a form of loan from your broker to you at a fixed interest rate, not very different from the loan you get to buy a house. If the securities you purchase go up in value, you get to keep all the gains!
  
• Options - Options can be used as a form of leverage as well, where a small amount of money paid to the actual security holder gives you the right to buy or sell a large number of shares at a pre-determined price. You are thus in control of a large number of shares without actually paying the money for them. The profits in such situations can be enormous.

There are several other examples of leverage, and it is undoubtedly one of the most sought after methods of wealth generation.

Getting in on the ground Floor - the Venture Capitalist Syndrome

For example, let us say your friend opens a book-store on a niche-item, and asks you to invest $20,000 in it, and offers you a 20% interest in the company in exchange i.e. 20,000 shares at par value of $1 to you.

After a couple of years, the company's balance sheet indicates that the overall assets of the company exceed its liability by $200,000. This means, your 20% share is now worth $40,000! You get a 100% gain in 2 years - not bad at all!

Of course you may not actually see the money anytime soon, but at least on paper, your net-worth has gone up considerably!

Venture capitalists (VCs) do this all the time - but they are keen to see their money back. Hence they invest in companies that will go public quickly and the VCs could sell their shares in the market.

A related methodology exists when investors invest in companies that are totally out of favor in the markets. Smart investors do this when they believe an upturn in the general industry or trend is likely to occur and that it is a good time to get in on the bottom floor well before others join in. These investors build up their position over time and then watch as others join the party. They finally bail out a little before the top and are laughing all the way to the bank.

Build it Yourself - The Entrepreneurial Way

This is the method that a lot of businessmen and women have followed since time immemorial. It is also one of the most rewarding and value-adding method of building wealth. You could:

• Build a product, and sell it to multiple consumers
  
• Retail a product, buying it at wholesale
  
• Provide useful information and supply it to many
  
• Provide a specific service (fitness coach, physio-therapy, doctor)

and many more.

A smart entrepreneur views the entire venture as a product that can be sold, and puts in place processes and people such that dependence on the entrepreneur is reduced to zero. This way, the business throws out free cash for the use of the entrepreneur while he or she is busy on the their next project!

Compounding

The holy grail of investing - compounding. The concept is simple -let your money grow by letting it remain invested. If your investment grow by 10% this year, and 10% again next year - by leaving it invested, your net growth of capital is 21% over two years. If the investment growth of year one had been spent and not allowed to grow, the total capital would have grown only by the 10% growth of year two. A significant difference right away!

And compounding has a way of growing exponentially after some time. So letting it work on your investments for 10-20 years can drive amazing results!

Of course all investing websites, financial advisors and newspapers frequently talk about this particular form of compounding and ask us to show patience with our retirement portfolios!

No fundamental arguments there! It does work!

There are other forms of rapid and large wealth building as well, but these four tend to be the most frequently used, analyzed and understood.