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

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Think Big

Posted by Muthu on January 21, 2015

Those of you who are investing for 5 years or more, regularly through SIPs, have already started experiencing the power of compounding and equity.

This is only a beginning. You would make huge wealth through equities in the years and decades to come.

I’ve written about this couple of months ago. But I want to reemphasise this again. If you can internalise this one piece, you will build a great fortune.

Aim for really big money over next 20 years. Once you accumulate wealth, you can then think about distribution in terms of how much to give to heirs, what to give back to society etc.

How would you feel if you can have Rs.60 crores after 20 years?

Those of you who have accumulated Rs.1 crore so far and doing a SIP of Rs.1 lakh per month (through equity funds), can expect to be worth around Rs.60 crores in next 20 years. That is USD 10 million in 20 years. You would be in top 1% of not only India’s population but the world population itself.

If you’ve Rs.50 lakhs invested in equity MF so far and is doing a SIP of Rs.50,000 per month, the value after 20 years would be Rs. 30 crores. With USD 5 million, you would also be in the cream of world population, top 1%.

For the above illustration, I’ve assumed good diversified equity funds delivering an annualized return of 18% over next 2 decades.

Someone who has Rs.2 crores in equity funds asked me how much he needs to save every month to achieve Rs.100 crore in 20 years; assuming 18% annualised returns. Roughly the amount works out to Rs.1.23 lakhs per month.

He asked how much that Rs.100 crore is worth today? Assuming a long term inflation rate of 6%, it is worth Rs.31 crores today. This means what you can buy with Rs.31 crores today; you can buy the same with Rs.100 crores 20 years down the line.

He was stunned by the power of equity, power of time and power of compounding.

As India moves from a low income per capita to a medium income per capita country, as we move from a $2 trillion to $20 trillion economy, over next 2 decades, with nominal GDP (real GDP + inflation) growth rate of around 15%, 18% annualized returns from stock market (equity funds) look very much possible.

As you are aware, stock market growth happens in spurts with a high degree of volatility. In bear markets, even a diversified equity fund falling by 40% or so is not uncommon.

You’re reaping rewards now for sitting tight in one bear market. Even in a secular growth country like India, we’ll go through couple of bull and bear cycles in next 2 decades. If you can sustain the temperament and the patience you’ve developed in last few years for next 2 decades, huge fortune is all yours.

I’ll continue to do my best to assist in developing the right temperament and behaviour to stay the course. The rest is in your hands.

Think big.

Patiently stay the course.

One Response to “Think Big”

  1. ratnakumar72 said

    Excellent article….iam investing in stockmarkets since 2000..beaten down in last bear market,,,but I stick to good stocks and now enjoying the power of stock market…I became a fan of you mr.muthu…

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