ARE YOU AN ASPIRING MILLIONAIRE?

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Published: 25th April 2020
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Have you ever dreamt of becoming a millionaire in your 20’s or 30’s? Do you have extraordinary business plan or an IIM degree? Are you a computer or IT genius that creates magical applications for fun? If not then you are just like me and more than 99% of the human population. This however can’t stop us from chasing those millions but we’ll probably need to take a different approach.
We have grown up with the belief that the only way to be financially secure or rich is by ‘saving’. This statement is true but incomplete. The secret to become financially secure and rich is by ‘SAVING & INVESTING’.
For example, if we save Rs 5,000 per month for next 5 years, we will earn an interest of Rs 70,000 to 80,000 in total. On the other hand, if we ‘save & invest’ Rs 5000 on a monthly basis for the same amount of time then we can earn a return of Rs 80,000 or more per year for 5 years assuming we reinvest our capital gains and our ability to take risk. This calculation is on a 30% compounded rate of return that good investments easily offer.
The example aforementioned rightly explains the power of investing. Most of us are aware about the returns we can capture by investing in the stock market yet we do not make an attempt to understand and study it. Are we too young to think about financial planning? Warren Buffet was 11 when he made his first investment. He started saving when he was 6 by selling soda pops, peanuts and magazine door-to-door and used that money to invest. Look where he is now.
As youngsters we don’t think about investing. We are simply hoping for things to fall into place sitting on our throne of procrastination. The average 24 year MBA fetches a salary of about Rs 0.8 million per annum. Assuming a high raise of 20% every year, he will be earning about Rs 2.5 Million per annum by the time he is Rs 3 million if he is brilliant. That is nowhere close to the millions he dreamt about.
Busy in our mundane job environment, we fail to recognise our innate potential. We fail to calculate our potential cash flow or our cash flow’s potential return. We all have a hidden businessperson which becomes recessive as we grow up due to the herd mentality. Learning investing is an empowering tool which will open up new avenues or atleast build up a pool of funds for the people who are looking to start something of their own, get a fancy car or a dream house.
Let’s look at some stocks which provided minimum 100% or more return within a year : (Aug 2014 – Aug 2015)(Source : Moneycontrol) :-

1.Kesar Terminal : 100%
2.Caplin Point Laboratories :300%
3.Shilpa Medicare :100%
4.Coral Laboratories : 394%
5.Suven LifeSciences : 100%

The pace at which a company grows differs from the movement of the price of the share in the stock market. The best way to capture is to save a small amount monthly and invest the same for a time horizon of minimum one to three years to get the supernormal returns.
Now coming to the point of becoming a millionaire by ‘saving & investing’.
If you save Rs 0.1 Million out of your annual salary now and invest it for a period of 10 years assuming the compounding, revinvestment of gains and a decent annualised rate of return of 30%,you will end up having a sum of Rs.1.3 Million at the end of 10th year. Plus,if you keep investing the same amount every year then after 10th year you can withdraw Rs.1.3 million every year.
The gains are directly proportional to the amount we invest NOW. If every year we discover one mid-cap stock with exceptional fundamentals, we can DOUBLE our money each year. And if we double our wealth each year then eventually we can add our name to India’s young millionaire list.

Inspired by and Gratitude to my mentors Sumant Kant Kaul and Sumeet Kaul

- Ashna Dhuper

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