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

August 12, 2014 09:35 IST

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?

Most Important Lessons:

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:

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. :-)