Build wildfires, not candles

The Unconventional Truth About Building Wealth

In the world of investing, there's a fundamental flaw I see time and time again in the portfolios I analyze. It’s a subtle mistake, born from well-intentioned but misplaced advice. It’s the reason so many diligent, patient investors end up with mediocre results after decades of saving.

They are taught to build candles, when they should be building wildfires.

Think about it.

Picture a single, elegant candle. It provides a gentle, steady light. But what happens when a gust of wind comes along? A puff of air, a minor inconvenience, and the flame is gone. The light vanishes, leaving only a wisp of smoke.

Now, picture a fire that has taken hold in a forest. It’s a roaring, consuming force. When the wind blows on this fire, it doesn't extinguish it. It feeds it. The wind carries embers to new ground, spreading the fire, making it larger, more powerful, and unstoppable. The very force that would kill a candle gives the wildfire its devastating strength.

This is the most powerful metaphor I know for building wealth.

The most common advice dished out to new investors is "diversify, diversify, diversify!" It’s presented as the cardinal rule of safety. And the principle itself isn't wrong, but its timing is everything.

Following this advice from day one is like trying to light ten candles at once with a single match in a breeze. I see it constantly in the portfolios people share with me. An investor starts a Systematic Investment Plan (SIP) with ₹10,000 per month and, in an attempt to be "safe," splits it across 6 or 7 different mutual funds.

On paper, this looks “diversified.” In reality, they’ve built a portfolio of tiny, flickering candles. Each position is too small to generate a meaningful return. A 20% gain on ₹1,500 is just ₹300. It’s statistical noise.

Worse, when the wind of market volatility blows, these small positions are fragile. The investor's attention is scattered, their conviction is diluted, and they are far more likely to panic. Their decades of patience can be rendered pointless because the base was never allowed to grow strong.

The wildfire approach is different. It’s about focusing your resources to build a powerful core. It’s about understanding that for wealth to compound meaningfully, it first needs mass.

A wildfire starts with a concentrated source of heat and fuel. In investing, this means channeling your capital into a small number of high-conviction ideas. This is the secret of how significant wealth is truly built. It’s not about owning a hundred stocks; it’s about owning a few exceptional businesses or funds and letting them do the heavy lifting.

This isn't just theory. It's a psychological and mathematical reality. By focusing your investments, you achieve two things:

1. Meaningful Compounding: Let's reconsider that ₹10,000 SIP. Instead of splitting it six ways, the wildfire investor channels it into one or two carefully chosen, high-quality funds. After a few years, that position has grown into a significant corpus. A 20% return on ₹5,00,000 is ₹1,00,000. That’s a return that matters. That’s a return that accelerates the journey. This is the fire catching hold.

2. Psychological Conviction: When an investor has done their research and chosen to back one to three core investments, their conviction is naturally higher. They understand them better. When the market winds blow, they don't see a fragile flame about to be extinguished; they see an opportunity for their wildfire to spread as they continue to add fuel at better valuations.

A Tale of Two Portfolios: What I See Every Day

This pattern is so clear when looking at real-world examples. I often see a portfolio where someone is investing ₹20,000 a month into eight different mutual funds. Their statement is a long list of small, flickering amounts. The growth is slow, diluted, and frankly, uninspiring. It's a classic "candle" portfolio, built on fear and over-diversification.

Contrast this with the investor who puts that same ₹20,000 into just one or two high-conviction funds. This focused approach isn't just theory; it's the bedrock of my own investment philosophy. By channeling my SIPs into a concentrated position, I am building that powerful core. The growth is tangible, the focus is clear, and the compounding has a chance to work its magic on a meaningful sum. This is the wildfire in action.

How to Build Your Wildfire: A Practical Guide

This isn't a license to be reckless. It’s a strategy for focused, disciplined growth.

1. The Rule of 1-to-3: For your core SIP investments, stick to a maximum of three mutual funds. For many, one or two is even better. Choose well-managed funds with a consistent, long-term track record that aligns with your risk appetite.

2. Feed the Fire Consistently: The power of this strategy lies in discipline. Don't stop your SIPs. Every month, you are adding more fuel, building your core investment's size and potential.

3. Know When to Diversify (The Tipping Point): So, when is the right time to diversify? You do it after the wildfire has been built. Diversification is a tool for wealth preservation, not initial wealth creation.

4. You diversify when your primary corpus has reached a critical mass—a point where protecting what you have becomes as important as growing it further. This could be when your portfolio is large enough to fund a major life goal, or when a 20% drawdown would be financially and emotionally devastating.

5. At that stage, you can start strategically moving some capital into other asset classes. You are now fireproofing the forest around your wildfire.

The final word: Stop trying to protect a tiny flame from the wind. Instead, build a fire so large and so hot that it harnesses the wind's power for its own growth. Be the architect of a wildfire, not a collector of candles. Your future self will thank you.