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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Get rich slowly

Posted by Muthu on March 1, 2011

If someone has invested $1000 with Warren Buffett (Berkshire Hathaway) in 1965, the value of the same at the end of 2010 is $3.94 million.

An absolute return of 4,90,409% in 45 years, annualized returns of 20.2%.

In the same period, even the index S&P 500 would have given decent returns, ofcourse nowhere near to that of Buffett’s.

The same $1000 invested in S&P 500 would have become $56,987. An absolute return of 6262% and an annualized return of 9.4%.

Buffett has outperformed the index by 10.8% over a 45 year period!

As a personal financial advisor, we advice on wide range of issues and offer various services.

I love my profession. Personal finance is my chosen profession. Even in that what gives me utmost happiness is making a person invest regularly for a long term.

I’m confident that there is so much wealth to be created in the economy in the decades to come.

The best way to participate in the same is by investing in equity regularly every month through mutual funds.

Invest in equity only if your outlook is not less than 10 years.

You should start seeing the effect of compounding after 5 years.

We’ve said no to many who wanted to invest in equity for short term. Loosing an opportunity is far better than loosing credibility. In short term equities can be extremely risky. In the longer run it reflects the fundamentals and intrinsic value of the business.

People who ask for short term equity investments are the ones who want to get rich quickly. Any one who offers you the path of quick and easy money is either a liar or a trading genius. We are neither.

We are personal financial advisors with reasonable knowledge and good integrity. 

We continue to keep learning.

To quote what Dhirendra Kumar of Valueresearch wrote some time last year, over the past 10 years, a saving of Rs.20,000 a month at typical fixed income interest rates would have left you with Rs.36 lakhs while a SIP in a typical equity fund would have left you with around Rs. 1.2 crore. That’s the kind of differential that can change someone’s life.

In the example given above by Dhirendra Kumar, the return on fixed income product is 7.6%p.a and return on a typical equity fund is 26.74%p.a

Do not forget to read the disclaimer section in our portal.

Most of our clients have an investment tenure of 20 years+. You would see many bull, bear and flat markets in this period.

The units you accumulate during bear and flat markets would take your wealth to next level in the subsequent bull market.

Bull markets will definitely come. In bear or flat markets, we think that the bull markets never happen.

In bull markets, we think the party never ends and prices would go only in one direction.

Neither is true.

Markets are always cyclical and would continue to be so.

You can make money using this cyclical nature to your advantage.

Investing regularly for long term through SIP route, ignoring all the noises would make you far wealthy beyond your dreams.

The penetration of equity in India is very low. Our fascination is limited to real estate and gold.

Even out of the people who are exposed to stock markets, many are traders who invariably loose money.

Only a miniscule portion is in the path of creating long term wealth.

There are roughly around 8 to 10 million people (unique folios) invest in mutual funds. 10 million out of a population of 1150 million, 0.87% of the population.

Even out of this 10 million, the average tenure of equity investment is less. I understand from industry sources the average tenure has started increasing from last year due to investor education.

So it is safe to assume that only 10% of the investing population, 1 million would be investing for long term (10 year and above).1 million is 0.09% of the country’s population.  

I’m happy to note that our clients are among this 0.09% of the population.

No other asset class can give the return which equity can give in the long run.

I’ve a request for you.

Whenever your income increases or liability reduces, do not forget to increase your monthly SIP amount.

Also tell your friends, relatives or colleagues about the benefit of SIP. No need to do any pushing. If they are receptive, share with them the benefits of creating long term sustainable wealth through this way. If they are not receptive, talk about the latest movie or politics.

If anybody is interested, we would be glad to meet them and be their investment advisor.

We want to make as many people wealthy as possible. Why because we like it and that is our profession!

Let us sow the seeds now and the harvest would be great.

Get rich slowly – in the mean while keep enjoying what you are doing.

One Response to “Get rich slowly”

  1. DMan said

    Thanks for the informative article. Keep up the good work.

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