How is wealth defined? Is there any perfect formula to create wealth? How much wealth do you need to live comfortably?

Can insurance, equities, mutual and real estate funds help reach your goal of wealth creation? What is the ideal mix? How much wealth can real estate generate if you have an investment horizon of 15-20 years?

Are there any shortcuts to create wealth?

Get Ahead money expert Sanjiv Mehta answered these and other wealth-related queries during a chat with Get Ahead readers on April 16.

For those of you who missed the chat, here is the transcript.

Part II -- Good mutual funds to invest in

kamal agarwala asked, how can I create wealth in my lifetime?

Sanjiv Mehta answers, The first issue will be to define wealth. The best definition I like is 'passive income sufficient to sustain a desirable life style'. If you define your important financial goals and quantify them, then an appropriate asset allocation can be determined to achieve those goals.

RaviKiran asked, Hi Sanjiv. What is the best method to create wealth? Should I take the equity market route or shall I take the mutual fund route? How can I identify my insurance needs? Any good formula to do that?

Sanjiv Mehta answers, Equities are amongst the best assets. These are comparable to the dashing batsmen like Ponting, Hayden, Jayasuriya who have good averages of 40-45 but also a good scoring rate of almost 90 runs per 100 balls. Stocks are similar with very good returns at low risk.

However, they have to be employed in a certain manner. I presume when you say equity you mean individual stocks -- that debate is of convenience vs control. In mutual funds, you are outsourcing selection to fund manager; in direct stocks, you have the control. That is dependent on every individual; the important thing is to determine how much to allocate based on economic cycle and personal life cycle factors. Insurance need is roughly your monthly expenses multiplied by 150. If those are Rs 30,000 per month then a cover of Rs 45 lakhs will be good.

mamu asked, Dear Sir, Can you give me the ideal mix of equity, MF, insurance for the long-term that will help me generate wealth worth Rs 1 crore in the next 20 years. I am 35 right now and can invest Rs 1 lakh per annum. Thank you in anticipation.

Sanjiv Mehta answers, Insurance -- the way it is presently in the Indian market -- should be used only for protection and not for investment. So then buy only term insurance. Investing Rs 1 lakh per annum for 20 years you will need an annualised compounded rate of almost 15% to make one crore rupees. You are 35 years old and therefore equities will play a prominent role in your portfolio. Mutual fund or direct equity is your choice as answered in the previous question, only thing is that in both, principles of investing in stocks apply -- those are appropriate time horizon, diversification and valuation.

amit123 asked, Sanjeev how would you define Long Term Investment and Short Term Investment and which is the better of two?

Sanjiv Mehta answers, For various asset classes, appropriate time horizon will vary. For stocks, considering the present Indian economy, 2-3 years will be appropriate while for real estate around 10 years.

Taxation will have its own definition -- long-term capital gains are if stocks are held for more than 1 year. For assets like stocks and real estate, these are much better in the long term since lot more predictable in the long term while volatile in the short term.

santosh asked, is mutual funds or shares a good option to earn more?

Sanjiv Mehta answers, Equity or stocks or shares is one of the best asset classes. Worldwide history over a long period of time shows that stocks deliver consistently superior returns. Therefore they are very good and should be an integral part of each and every portfolio.

avignon asked, Sir, do you think that real estate can help us generate good wealth with a 15-20 year investment horizon? What are the other long-term avenues to generate wealth?

Sanjiv Mehta answers, Real estate is very good with this time horizon. The only thing is that customised research for identifying good opportunities is important in real estate. Stocks are very good long-term investment vehicles. Commodities and art are also good under certain economic cycle phases but remain reserve players. Structured products will be big in the Indian market and will provide another alternative.

Aslam asked, Sir, how easy or how difficult you think is the game of creating wealth? Any short cuts to wealth or is it very hard work?

Sanjiv Mehta answers, Power of passive income is huge. While you need active income as raw material, good asset allocation for a saving of only 10% of your savings can reduce the dependence on active employment greatly. So smart savings and investment can make the quality of life much better.

v asked, please advice on the best type of insurance. Should I go for term/endowment policy?

Sanjiv Mehta answers, Definitely term. Insurance saving products have huge costs, especially in the initial years and their returns are inferior to comparable products.

narendra asked, If I invest Rs 15 lakhs in shares today, what kind of returns can I expect in the next one year?

Sanjiv Mehta answers, It is good to invest in shares with a 2-3 years horizon. For such a horizon you can expect a compounded annualised return of 15-18%.

siri asked, if I save Rs 5k per month for the next 30 years which avenue would be the best to grow my money at a fast pace? Should I go for a mix or one type of investment, kindly suggest?

Sanjiv Mehta answers, Stocks, real estate and commodities will be a good since the portfolio risk is reduced by diversification.

santosh asked, hi sanjeev how to become a billonaire? I am 32 years old and earning Rs 30,000 per month. Shall I invest in shares and land?

Sanjiv Mehta answers, I will define wealthy as somebody who achieves his important financial goals and not by his net worth. Saving at least 10% of your income will be very useful and investing them in stocks given the long term India story will make your retirement very comfortable. Acquiring real estate for own usage will also be beneficial.

ajaya asked, best form of investment for someone above 60 years?

Sanjiv Mehta answers, This is a personal life cycle stage which requires more liquidity since dependence on active income is less. So short term debt schemes and monthly income plans will form a higher proportion. However, if you live even beyond 80 years, then some allocation to stocks is also warranted.

Part II -- Good mutual funds to invest in