What is the quickest and most effective way to create wealth?

RK, County Armagh

Get lucky. There is no quicker or more effective way to create wealth than to have it fall in your lap. You could win the lottery, pull off a bet at fantastic odds, find buried treasure or a rare art work, or marry well. Alternatively, you could invent a miraculous gadget or be talented enough to pull in a huge income from sport or show business.

More realistically, there are two basic approaches to creating wealth: form your own commercial enterprise, or invest in other people’s.

Bob Fraser, senior wealth adviser at Towry Law, said: “Significant wealth is often created by building a business and its eventual sale. This may be the most effective way but it is rarely quick.”

Listen to your temperament. Don’t force yourself to be an active entrepreneur or a passive portfolio manager if it is not in your nature. A key factor is your attitude to risk. If you don’t like much risk, settle for accumulating wealth slowly in blue-chip shares or government bonds.

You ask for the quickest method of creating wealth. That is to take as much risk as you can, from outright betting to backing unlikely inventions or the most speculative shares. But be prepared to be wiped out.

“For very high risk and potentially very high return,” said Robin Keyte of the Well Money Clinic, “the price movements of investment trust warrants are exaggerated fluctuations of the change in the investment trust share price. They are not for the faint-hearted — it is entirely possible to lose all — but they do offer the potential for rapid wealth creation.”

Stuart Fowler, managing director of financial planning consultant No Monkey Business, suggests momentum investing — spotting a share, commodity or foreign currency price that is going up and jumping aboard.

Said Fowler: “As long as you pass the parcel in time, this can build wealth quickly. The results are less happy if you start your strategy just before the music stops, as might today be the case for emerging markets and gold.”

In all cases, you have to be constantly vigilant, critical and questioning, and if you even suspect that a prospect is too good to be true, then it probably is.

In 2007-08, my wife and I bought three-and five-year National Savings & Investment (NS&I) index-linked certificates because they were a tax-free no-brainer that protected the value of our savings in real terms — and in my wife’s case stopped the taxman from clawing back her age-related allowance at a marginal tax rate of 70%.

Should we dump them now they are paying a measly fraction over 1% in our case, with the retail prices index having slumped from about 4.5% to minus 1.4%?

We’ve hung on for the past year because so many economists have forecast that inflation will take off again, but with Bank rate seemingly rooted at 0.5% this appears increasingly unlikely for at least two to three years, by which time these certificates will have matured.

DJ, Aberdeenshire.

I understand your frustration — finding decent savings returns is a tough task at the moment — but I think you should see these certificates to maturity.

First, nobody knows what inflation is going to do. It could jump next year. Second, as you are both presumably pensioned, index-linked certificates are a good bedrock investment at your age.

Jason Butler, investment manager at Bloomsbury Financial Planning, said: “A guaranteed rate of return of 1% a year tax-free is not to be sniffed at, even if the net of tax return from some deposit accounts might, in the very short term, pay a higher real return.”

NS&I index-linked certificates have rollover options as well as new issues, so you can build a substantial tax-free portfolio.

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