Power of Investing in Equity Market – Unbelievable but true!
When we first heard about Mr. Rakesh Jhunjhunwala (People call him India’s Warren Buffet), We could hardly believe – how a middle class person with an initial investment of only Rs. 5000 could become India’s 51 st richest man and world’s 1062nd richest man (As per the Forbes 2010 ratings) , with net worth close to $ 100 crore just in nearly 25 years.
The illustration given below will give you a clear insight on how it would have happened…
Just Imagine…
How much do you think you can make in 30 years by just investing Rs.10,000 (once) in any of the Investment avenues – Stocks, MFs, Gold, Property, FD etc.?
Just have a wild guess ???
Let us take a real life example of an investment in a particular stock…
Suppose, you or / your Dad had subscribed for 100 shares of “X” company with a face value of Rs. 100 in 1980.
In 1981 company declared 1:1 bonus = you have 200 shares
In 1985 company declared 1:1 bonus = you have 400 shares
In 1986 company split the share to Rs. 10 = you have 4,000 shares
In 1987 company declared 1:1 bonus = you have 8,000 shares
In 1989 company declared 1:1 bonus = you have 16,000 shares
In 1992 company declared 1:1 bonus = you have 32,000 shares
In 1995 company declared 1:1 bonus = you have 64,000 shares
In 1997 company declared 1:2 bonus = you have 1,92,000 shares
In 1999 company split the share to Rs. 2 = you have 9,60,000 shares
In 2004 company declared 1:2 bonus = you have 28,80,000 shares
In 2005 company declared 1:1 bonus = you have 57,60,000 shares
In 2010 company declared 3:2 bonus = you have 96,00,000 shares
In 2010, you would have a whopping 9.6 million shares of the company.
Any guess about the company? (Hint: Its an Indian IT - Information Technology Company)
Any guess about the present valuation of Rs 10,000 invested in 1980?
The company which has made this humongous fortune is “WIPRO” with present valuation of Rs. 455 Crore (excluding dividend payments) for Rs. 10,000 invested in 1980 and at that time it was not into Information Technology.
What made Wipro in the last 30 years is the Vision and Leadership of Azim Prem ji.
and it is not only true for WIPRO, you could have made a similar fortune had you invested in Companies like Reliance, CIPLA, Infosys or Titan.
For instance if you had invested just Rs. 1,00,000 in Titan Industries, in the year 2000, in just about 10 years, you would be worth Rs. 60 Lacs today.
Unbelievable, is not it ?
But its a Fact!
Investing in companies with good fundamentals & proven track record can give far superior returns compared to any other asset class (Real estate, precious metals, bonds etc) in a long run.
The problem however is to identify such stocks early & then staying invested in them for very long period of time say 30 years as in this case.
Will Wipro provide similar returns in next 30 years?
Probably not, its already an IT giant.
You need to explore companies in small & mid cap space with good track record and stay invested to create wealth in a long term.
The caveat, however is that there would be a large number of companies which would have given losses to the people who invested in them just on the basis of a tip without any proper research.
So, share markets are the place which can give the experience of both heaven and hell….depends on your knowledge, expertise, guidance, patience and of course luck.
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