Credo Capital

In 1971, Govt’s Enemy Property Office had shares worth Rs. 29 Cr’s value mostly belonging to people who left India during Indo Pak war of 1965. Cut to 2015, exactly 44 years later, the shares have been valued at 10,000 Cr. That is approximately 345 times in 45 years !

Imagine what % return per year it must have taken to grow by 345 times ?

approximately 14%, that is all.  Over 44 years that 14% made 29 Crs turn into 10,000 Crs !!  This was a static investment on which nothing was done,  This is not all, the dividend last year alone on this was some 40 Crs ! The 14% return does not include dividends. This is what equities can do over long periods of time, create real wealth.

But hardly anyone invests in equity or equity mutual funds and those who do don’t stay invested for more than 2-3 years, forget 20 0r 30 years !! Only 20 or 30 years can create wealth, buying and selling every 1- 2 years will create lots of paper work and not wealth !!

Moral of the story : Invest for really long periods to create wealth, Don’t have 29 crs to invest for next 44 years ? Don’t worry, I don’t have too 🙂  but surely some of us can invest Rs.10000 p.m over next 20 years, at the same 14%  that can turn into Rs. 1.31 Cr’s.I’m fine with that, and guess you will be too 🙂

Source for the news on Enemy Property :

http://www.business-standard.com/article/markets/enemy-shares-to-be-dematerialised-115041700037_1.html

The letter below,written by a dad, whose 7 year old son saved 500 Rs per month and gave to his dad for investing. Think his dad wanted to teach him about investing in a disciplined way through mutual funds so gave this amount as pocket money. Before you say nice story and move on, as after all, what can Rs. 500 p.m grow to, a few thousands by the time the boy reaches college or gets married? Here are the numbers and they are startling..

College is 10 years away when he turns 17. by the time the little boy goes to college, it will be Rs 1.68 Lacs. Decent money, but definitely not enough for a good education that too ten years from now.

At 27, when the ‘boy’ is old enough for marriage the investment would have grown to Rs.11 Lacs good sum but dont think enough for the typical big fat Indian wedding even today, forget 20 years later.

Let us assume that since it is not enough for education, or marriage the dad will continue the Rs. 500 investment and the son after getting a job invests the same amount every month till he is say forty,

So the total amount invested is  Rs. 1,98,00 over a 33 year period ( Rs.500* 12*33)

Assume 18% return ( markets have given 20% in the last 20 years but let us assume 18%)

The total value is a whopping Rs 1.22 Crs.

All from Rs. 500 p.m invested diligently over a long period in equities as they give the best returns over long term. If it were just increased by Rs. 500 more to Rs. 1000( which is what you may be paying for your mobile bill every month!!) it will be Rs. 2.44 Crs. Agree that inflation would ensure that Rs. 2.44 Crs may not be enough 33 years later but it is better then not investing anything, right?

Now, what is your excuse for not investing, that you don’t have Rs.500 or Rs.1000 pm ?