Vilfredo Pareto: The 80 20 Principal

The Vilfredo Pareto, the 18th century Industrialist, Economist & philosopher has given the 80 20 principal to the world.

The 80 20 Principal -

The Principal states that, for many events 80% of the effect comes from 20% of the causes. Say for Example 80% of any Business Sales Revenue will come from 20% of the customers or clients. This law applies to wealth also. It means that, 20% of the people from any population will own 80% of the Total Wealth and rest of the 80% people will own 20% of the Total Wealth.

I know this is a very blunt law. In fact, it may hurt you also. But well, this is true. You take the sample of any size from the population and you will find, less than 20% of people will own more than 80% of the Total Wealth.

According to Vilfredo Pareto, this rule applies to the Real Estate owners also. Now let us apply this law to the population of India.

Right now when I am writing this article, there are total 1.5 Crore Demat accounts in the country which is now MUST for stock market investing. it means that Maximum 1.5 Crore people of India are holding shares of Company (Wealth). Now India is the second largest country of the world according to the population after China. The Total Population of India is 1 Billion (Over 100 Crore).

Now in the population of 100 Crore, only 1.5 Crore people have Demat accounts. It means that only less than 1.5% population of India is investing in stocks. and as all of you know that, Investment is very important for being rich. If you don’t invest your money, you can never be rich.

So right now only 1.5 crore population of India is eligible of being rich. And that is less than 1.5% of the total population. So it means that in countries like India, less than 1.5% population (Demat Account Holders), own 100% of the Stock Market Wealth.

Of course, Gold, Bonds and Real Estate are also wealth. But the only stock market wealth is around Rs.50 Lakh Crore in India which is owned by just 1.5% population of India.

So I think, the 80 20 Principle is badly applies here in India. In India, the modified 80 20 principle is applied and that is 99 1 Principle means 1% of the Indian Population owns 99% of the Total wealth of India (Stocks, Bonds, Gold, Real Estate, Art, Businesses…etc..) and rest of the 99% share only 1 % of the wealth.

So What to do if you want to join the group of those 20% in the world who own 80% of the Total Wealth of this world?

Well, It is Simple. You Must be Asset owner to enter in those 20% of this world (And in India those 1.5%) who own 80% of the total wealth. So buy any Asset out of your money such as Stocks, Bonds, Gold, Real Estate, Art, Mutual Funds, PPF, Fixed deposits, Blogs, Forums, Businesses, Web sites, Antiques, rare things, Intellectual Properties, Copyrights or anything else which is likely to appreciate in the future and known as Asset. And hold that Asset for decades. You will automatically enter in to the Rich Club…!!!