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From Rs 2 lakh to Rs 8100 crore in 34 years!

August 12, 2014 09:35 IST

From Rs 2 lakh to Rs 8100 crore in 34 years!

P V Subramanyam

Kid you not! This is for real. But USELESS information now! If you want to retire rich forget such stories and start investing now!

But who on earth has this kind of patience? That is the point!

How many of you have grudged your friends who say "My father had bought a flat in Santacruz for Rs 200,000 in 1977, now it is worth Rs 30,000,000"? Surely you felt pangs of jealousy, did you not?

Did you think if I had this flat I could have retired instead of suffering my boss? You bet!

Did you know that unfortunately you cannot set the clock back? Which means even though this information about a flat in Santacruz is accurate, it is completely (well almost) useless information!

And since you cannot cry over spilt milk, let us at least cry over Vodka or Champagne.

Instead of buying a flat in Santacruz if your friend's father had invested this amount in equity shares of Wipro when it listed in 1980 it would have been worth, hold your breath Rs 8100 crore (apart from the dividends that you consumed for your lavish lifestyle).

I am not sure about prices in Santacruz, but surely for Rs 8100 crore (now tax free, voila!) you could have bought a sizeable chunk of Santacruz -- or so I think!

And Wipro is not alone. Bajaj Auto, Hindustan Lever (Oh yes inspite of not participating in the 2002 to 2007 boom), Reliance, Cipla, Nestle, Ranbaxy would have all done that.

If you had done a SIP in the equity index (sensex assuming you could buy from 1977) on a dividend consumed basis your returns should be in excess of 20 per cent per annum. Not bad even considering that during some of those years inflation was at 12-15 per cent per annum. It is still far ahead of Santacruz. Approximately two times as much.

What can one learn from such examples?

  • Lesson number 1: Do not cry
  • Lesson number 2: If you insist on crying, cry for Champagne not milk.

Most Important Lessons:

  • You cannot set the clock back for sure. Start NOW.
  • Start saving in a good equity fund. If you cannot choose a good fund, do a SIP in the Sensex.

The last time I saw Templeton had one of the cheapest Index funds. It is equity (business) that gives better returns than gold or real estate.

Ask yourself the following questions:

  • Did I have Rs 200,000 to invest in 1980 (ok ask your dad or grand dad as the case maybe)?
  • Would have I had the patience to hold it on for 34 years?
  • Would I have been happy with my money DOUBLING in 3 years and sold it off for Rs 400,000?
  • Would I have sold it off at Rs 50 lakh thinking 'It cannot go up further' and then put that amount in a tax saving bond?
  • Would I have sold it partially to invest in Silverline? Worse than that would I have sold everything and invested that in Silverline or Crest Animation (both stocks has dud value today while once they were the stock market darlings)?

It is not easy to make money in the share market if you are too intelligent by half. It rips you apart.

Never said equities is easy, but I can assure you, it has created wealth. :-)

Photographs: Uttam Ghosh/