Some pointers to remember to build wealth.....
1) In the long run, no other asset class can match the returns from equity.
2) Equity returns are never smooth like a bank fixed deposit. The returns from equity would always be lumpy.
3) 20% plus or minus return in a year is very normal. Either there would be over performance or under performance. It’s never a smooth flow.
4) Bull markets on an average last for 5 years and bear markets for 3 years. So normally one complete cycle takes 8 to 10 years.
5) It is not possible to time the entry and exit from equity markets. Nobody ever has done it consistently. The best way is to stay the course for long run. In every cycle, markets would continue to make new highs.
6) Secular long term bull runs for one to two decades has happened in various economies when they underwent a consistent high growth. So there is a strong possibility that next one decade can be a golden decade for equities in India. Don’t forget that even in a secular bull run a -20% or more in some years is very normal.
7)Markets grow in tandem with the nominal GDP growth rate. Good quality funds and stocks provide higher returns than the same. In the long run; markets, good funds and quality stocks keep only going up.
8) Warren Buffett has mentioned that he has seen more than 50% fall (in Berkshire’s price) 4 times in a period of 5 decades. In your two decades of investing tenure, you would face such instances may be at least two times. In India, it last happened in 2008. But don’t forget the fact that we swiftly recovered back to original levels within 2 years.
9) Equities are slave to earnings. As long as economy and earnings grow, markets would continue to do well.
10) I’ve been giving many examples of funds multiplying money between 40 to 90 times in last 20 years. In my opinion, there would be such opportunities in next twenty years as well. There is long way to go before our economic growth saturates. We are growing from a low base.
11) Unless you learn to have enormous patience, accept the volatility and lumpiness, you would lose out on the above opportunity. In the last 17 years, Indian equity funds have given an annualized return of 22.6%. If this performance repeats for next 20 years, we are sitting before an opportunity to multiply capital by around 60 times.
12) Investing regularly with discipline (SIP) would help you to benefit from stock market cycles and build huge wealth. Taking the above 22.6% example, Rs.50,000 invested a month for next 20 years should give you Rs.24 crores. There is no guarantee but the potential is very well there.
13) Patience, long term orientation and staying the course without disruption are some of the excellent tools available within you. Make best use of it.
14) How much ever I write or counsel, in the end it’s your psychology and emotional discipline which ultimately matters. As always, I would do my best to help you stay the course. But you have to make it happen.
1) In the long run, no other asset class can match the returns from equity.
2) Equity returns are never smooth like a bank fixed deposit. The returns from equity would always be lumpy.
3) 20% plus or minus return in a year is very normal. Either there would be over performance or under performance. It’s never a smooth flow.
4) Bull markets on an average last for 5 years and bear markets for 3 years. So normally one complete cycle takes 8 to 10 years.
5) It is not possible to time the entry and exit from equity markets. Nobody ever has done it consistently. The best way is to stay the course for long run. In every cycle, markets would continue to make new highs.
6) Secular long term bull runs for one to two decades has happened in various economies when they underwent a consistent high growth. So there is a strong possibility that next one decade can be a golden decade for equities in India. Don’t forget that even in a secular bull run a -20% or more in some years is very normal.
7)Markets grow in tandem with the nominal GDP growth rate. Good quality funds and stocks provide higher returns than the same. In the long run; markets, good funds and quality stocks keep only going up.
8) Warren Buffett has mentioned that he has seen more than 50% fall (in Berkshire’s price) 4 times in a period of 5 decades. In your two decades of investing tenure, you would face such instances may be at least two times. In India, it last happened in 2008. But don’t forget the fact that we swiftly recovered back to original levels within 2 years.
9) Equities are slave to earnings. As long as economy and earnings grow, markets would continue to do well.
10) I’ve been giving many examples of funds multiplying money between 40 to 90 times in last 20 years. In my opinion, there would be such opportunities in next twenty years as well. There is long way to go before our economic growth saturates. We are growing from a low base.
11) Unless you learn to have enormous patience, accept the volatility and lumpiness, you would lose out on the above opportunity. In the last 17 years, Indian equity funds have given an annualized return of 22.6%. If this performance repeats for next 20 years, we are sitting before an opportunity to multiply capital by around 60 times.
12) Investing regularly with discipline (SIP) would help you to benefit from stock market cycles and build huge wealth. Taking the above 22.6% example, Rs.50,000 invested a month for next 20 years should give you Rs.24 crores. There is no guarantee but the potential is very well there.
13) Patience, long term orientation and staying the course without disruption are some of the excellent tools available within you. Make best use of it.
14) How much ever I write or counsel, in the end it’s your psychology and emotional discipline which ultimately matters. As always, I would do my best to help you stay the course. But you have to make it happen.
