Power of Investing in Equity Market – Unbelievable but true!
When I first heard about Rakesh Jhunjhunwala (People call him India’s Warren Buffet), I could hardly believe – how a middle class person with an initial investment of only Rs. 5000 could become India’s 51st richest man and world’s 1062nd richest man (As per the Forbes 2010 ratings) , with net worth close to $ 1 Billion just in about 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 for100 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 Company)
Auy 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, isnt it ? But its a Fact! Investing in companies with good fundamentals and 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 and 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 and 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, Equity 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.
Do send me your feedback guys and yes don’t forget to give your ratings….
Prashant.
personalplanners 
Anwar Petiwala
June 12, 2017 at 3:30 pm
Excellent but I have made big loses also.How you suggest MRF Tyres future.Good Scrip like birla3m shall buy for long term
personalplanners
June 14, 2017 at 6:59 am
Although MRF is a good stock to own, Don’t just rely on one stock, instead build a diversified portfolio of minimum 15 – 20 stocks
of which 8 to 10 should be large cap stocks!
Hoop
November 27, 2015 at 4:29 pm
Good,
personalplanners
November 30, 2015 at 4:21 am
Thanks 🙂
Sreeramakrishna Grandhi
October 5, 2015 at 3:41 am
Referring to the Wipro example, when 1:2 bonus was issued in 1997, 64000 shares will become 96000 shares and not 192000 shares unless the bonus issue was in the ratio 2:1. For every 2 shares held, if 1 bonus share is given 64k shares will be 96k post bonus. Also subsequent calculations too will undergo a change likewise.
personalplanners
October 6, 2015 at 12:53 pm
No – For every 1 share held, 2 Bonus shares were given.
Allu saikumar
June 26, 2015 at 1:17 pm
I will happy
Amrit Raj Koirala
June 11, 2015 at 4:25 pm
I have tata mot 100@282, p focus 100@40, dlf 100@220, ib real 500@140, jp ass 500@64, unitech 100@35, l&t 100@940, ril 100@824, kwality 500@40, axis bk 100@286, hdfc bk 100@630, icici bk 150@206, sbin 100@184, hdfc 100@788, lic housing 100@225, gmr infra 100@30, rel infra 100@376, bhushan steel 100@128, tata stl 100@343, amtek auto 100@187, kajaria 100@524. 20 years time horizon what could be the amount?
personalplanners
June 12, 2015 at 5:57 am
My first submission to you is that no one can predict how much one will make in 20 yrs. but taking a worst case scenario you portfolio should grow at least @ 15% to 20% p.a. provided you immediately sell your real estate stocks like Unitech, JP Associate, GMR Infra, DLF and India Bulls Real estate.
sri
January 14, 2015 at 6:59 am
why d hell you put ur money for such long period and give way your next generation enjoy the fruit. Enjoy 25/100rs today and invest 50 in banks and 25 for day to day expense. even azimji cannot take all those million bucks with him at old age lol.. life is not only money, money is just a small portion of life, like a headlight for a bike,, u freaky investors..
personalplanners
February 27, 2015 at 12:31 pm
The idea is to save and invest on a regular basis and some amount of your investment should go into good quality stocks or MF for the long term so that you don’t have to worry for your retirement days. The 2 stocks that I can recommend you today are CRISIL and MCX. If you want a safe bet go for ITC.
Parag Diddi
April 22, 2011 at 3:12 pm
PP,
Really wonder why even professional fund managers missed on this stock. By the way, do you know of anyone apart from promoter (FRA) who held this stock so long???
PD
personalplanners
April 23, 2011 at 3:03 am
No PD…I am not aware of any one holding this stock for such a long period…but you can hold
some good stocks now. My prediction is that the Sensex would be at 100,000 by year 2022.
Prashant.
vaishu
January 1, 2015 at 3:15 pm
dear, i am also thinking nifty will touch 10,000 with in one or two years but how to invest in index. is there any way to invest…
personalplanners
February 27, 2015 at 12:28 pm
Yes. U can invest through Nifty ETF or any Index Mutual Fund
Sudhanshu
April 14, 2011 at 6:52 pm
Interesting article but in reality one has to be very courageous and lucky to keep such high performing stocks for such a long period. Many of these so called winner stocks have passed through millions of hands but very few would have held them for so long to earn these kind of phenomenal returns. The real question is what one can do so as not to succumb to temptation to book profits. Most advisors tell investor to book profit periodically. What do you suggest, should one book profit or not on regular basis.
personalplanners
April 15, 2011 at 4:06 am
Dear Sudhanshu, If it is difficult to identify such stock, you may identify a good MF like HDFC Equity or IDFC Premier Equity and invest through SIP for very long periods. You may go in for Dividend option which would automatically book profits.
Regards,
Prashant.
personalplanners
October 25, 2011 at 5:14 pm
Booking profits or not depends on the individual and his/her requirements.
If you have the patience for a real long term and the fundamentals of your
chosen stock are intact, you should not book the profit.