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

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Buy Right and Wait

Posted by Muthu on August 15, 2014

Happy Independence Day.

I’ve got many emails from you for the last piece. The fact that Rs.10,000 invested every month in a fund for around last 20 years would have grown into Rs.4.57 crores now has surprised many of you.

I could sense your regret that you didn’t start your SIPs twenty years ago or from the time you started earning. There is a Chinese proverb which states that the best time to plant a seed was twenty years ago and the next best time is now. You are all doing it now and you would see fortunes being made in next 10 to 20 years.

Since I illustrated by giving SIP examples there were some of you who queried on how lump sum would have fared.

In the same HDFC equity fund, Rs.10 lakh invested around 20 years ago is worth now (as on June 30th 2014) Rs.4.24 crore. Your money has multiplied by 42 times providing an annualized return of 21.17%

I’ll give you two more examples.

Rs.10 lakhs invested in Reliance Growth Fund in October 1995 has become Rs.6.59 crores as on 30th June 2014. Money multiplying by 65 times providing an annualized return of 25.05%

Sundaram Select Midcap came into existence 12 years ago ( July 30th 2002). Rs.10 lakh invested in the same is worth Rs.2.6 crore on June 30th 2014. Money multiplied by 26 times in 12 years providing an annualized return of 31.4%.

As I’ve been saying, in my opinion, based on past performance and expected future growth of the country, we may expect an annualized return of 18% in equity funds for next one to two decades.

At 18% returns, money multiplies by 5 times in 10 years, 27 times in 20 years and a whopping 143 times in 30 years.

These kinds of returns are possible only if we can wait ignoring the nonstop noises from media about economy and markets, not worrying about ups and downs in business cycles, holding on despite bull and bear markets.

Since you all invest through mutual funds, the only reason to switch a fund should be if it under performs its benchmark for 3 years or more. Every fund and fund manager would have short term under performances which is very common. If you’ve noticed, that’s why I don’t churn the portfolios and only advise you to stay the course.

I see my role as assisting you to shape your behavior so that you stay with conviction for one to two decades in the market and multiply your wealth by many times there by creating a fortune for rest of your life and next generation.

You should aim to think big of multiplying your money by many number of times over your working life. Once you think big, all you need to do is to buy right and wait. We are there to assist you in buying right and waiting long enough by staying the course.

The SIPs you’ve been doing for last few years and planning to continue for a decade or two would make you wealthy beyond your dreams. As I don’t mind repeating ‘n’ number of times, all you need to do is stay the course for next 10 or 20 years. You’ve shown conviction by staying in the bear market, you have started enjoying the bull market which may continue for some years to come and the cycle would keep repeating itself.

The example given above where money multiplied by 65 times in 19 years is after going through couple of bull and bear markets. Time in the market is very powerful as long as you are in the right vehicle.

I want all our clients to be very wealthy through this simple but very effective process.

Every one strives to make money through his business or profession and I’m no exception. But a man doesn’t live by bread alone. My non financial goal is to make all our clients very wealthy and financially independent.

All I need is a commitment from you to stay the course for a bare minimum of 10 years and preferably 20 years. I take up on myself to keep reinforcing this periodically to assist you maintain and internalize this behavior.

Ignore news, interest rates, market cycles, business cycles, political changes, your own emotions- do SIP for 10 to 20 years and see the results for yourself.

Happy financial independence.

6 Responses to “Buy Right and Wait”

  1. Jayant Fine said

    THANK YOU SIR ,       KEEP ENCOURAGING TIME TO TIME , YOU TOLD , 5 TIME IN 10 YEARS , 27 TIMES IN 20 YEARS , 143 TIMES IN 30 YEARS ,       PL TELL HOW MUCH IT WILL BE IN 25 YEARS   .                    PL TELL THE FORMULA FOR THAT .                                                          JAYANT   

  2. Vijay said

    Great article from u, Muthu Sir………..

    Plz KEEP IT UP…………

    Im investing @ mutual fund via SIP investment from ur teaching frm 2010 , particularly “SIP CROREPATHI ” article……..

    I was panic @ 2011, 2012 times wheather I decided wrong way……….

    But all my investments r now in profitable way…………..Thanks a lot………

  3. siva said

    Thanks Muthu for keep pushing us in the importance of doing SIP. This should motivate lot of people to start SIP ASAP.
    Happy Independce day.

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