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Equity compound wealth over time, Amazing!!

I am sharing examples for inspiration.

Let us travel back to January 2000. Both ITC and Infosys are known names then as much as we know them now.

January 2000 to September 2014 is 14.75 years- 177 months.

Many of us had the ability to save Rs.5000 every month in 2000.

If you’ve invested Rs.5000 every month for 177 months, the total investments over the period would be Rs.8.85 lakhs. This 15 year period comprises both strong bull and bear markets.

In case of ITC, Rs.8.85 lakhs invested in above manner (with 5K a month), would have accumulated 45,159 shares which is worth Rs.1.61 crores as on September 19th 2014. Not only that the dividend received over the above 15 year period is around Rs.22 lakhs. The dividend itself is close to 3 times the invested amount. Including dividend and capital gain, the annualized returns is roughly around 31.45%.

In case of Infosys, Rs.8.85 lakhs invested in above manner (with 5K a month), would have accumulated 4249 shares which is worth Rs.1.56 crores as on September 19th 2014. Not only that the dividend received over the above 15 year period is around Rs.15 lakhs. The dividend itself is close to 2 times the invested amount. Including dividend and capital gain, the annualized returns is roughly around 30.79%.

So by saving Rs.10K a month, you would now have Rs.3.12 crores and would have received Rs.37 lakhs as dividend, more than recovering the invested amount.

I checked Value Research as to how much Rs.10K invested every month in the same period would have given in an equity fund. I chose Reliance Growth Fund. The value of 10K invested for 177 months is around Rs.1.66 crores, annualized return of around 24.07%.

I would not recommend direct equity investing unless you can spend 8 to 10 hours every week solely for this purpose. Also it would take at least couple of years of reading and experience to reach the required threshold.

I don’t give advice on stocks, however for those of you who want to develop expertise and willing to do the home work, I would hand hold by recommending good books and articles.

The idea of writing this piece is to reinforce the power of equity and the necessity of ‘time’ as the critical factor in investing coupled with temperament to stay through both bull and bear cycles.


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