Tag: mutual funds

How a 15 year old can aspire to be a billionaire

How a 15 year old can aspire to be a billionaire

Last weekend I was at one of my relatives place.  She has two young kids.  One of them is around 19 years and the younger one might be around 14-15 years of age

I was very glad to notice that they had an interest in making investments at such a young age.  I also loved the idea that their father was actually instilling in them a habit of trying to evaluate different avenues in investing.  This means that in India the efforts of channels like ETNow and  CNBC TV18 & the efforts of the mutual fund industry and stock exchanges like NSE are starting to bear fruit.  If kids and parents start discussing financial products then the future is definitely bright for the Indian middle class.

When they came to know that I write a blog on achieving financial freedom, they thought of asking me for some recommendations on stocks and other investments, which I denied. I prefer not to give advice on any specific type of instruments or stocks, because a) I am not qualified and b) because everyone has a different risk appetite.

Since I like to look at just the basics and compounding and the rule of 72 are simple things that anyone can do at the back of an napkin, I just spent time with them on that.

Using the above I just explained to them without any use of even a calculator how wealthy he could grow.

If the younger son invests today Rs10000/- at the age of 15.  India’s long term growth rate has been about 15% average.  Even the indices therefore will grow at a long term average of 15%.

Therefore if he was to put this 10000/- in a Nifty ETF, it would also grow at an average of 15%.  By the rule of 72 if he divides the number 72 by 15% then he will double the money in about 4.5 years.  For simplicity let’s assume 5 years.  which means every ten years it will grow 4 times. So his investment table, if he keeps invested with this 10000/- would look like below.  Just staying invested without doing any hard work (incidentally staying invested could be the hardest thing) he can convert his Rs10000/- into Rs10million or (Rs 1 crore)

Age Amount@15% Amount@25%
25 40000 100000
35 160000 1000000
45 640000 10000000
55 2560000 100000000
65 10200000 1000000000

The second column is if he looks out for investments which can lead him to compound at close to 25%.  then you see the magic.  The amount converts to Rs1 billion (100 crores).  Look at what happens between the ages of 45 and 65.  At 45 he would have Rs 10 million and at 65 Rs 1 Billion.  Even Warren Buffet’s wealth if you Google at age 65 and now at age 85, he is one of the richest men on earth just because of this phenomenon.

Obviously getting 25% on a consistent basis is not going to be easy, over a long period of time.  But the key is going to be about staying invested.  I hope the young guy can.

If you have any young guy you know, just show him this table of what his 10000 today can do for him over  30-40 years.

Till next time….

Carpe Diem!!!

 

 

How women in India can change the destiny of the country – part 2

How women in India can change the destiny of the country – part 2

Continuing where I left last, when more women come into the workforce there is money in more hands.
First this money goes to ensuring that the basic necessities of life are taken care of.

The good thing about basic necessities however is that once they are taken care off, there is not too much more that needs to be done , so once you have had three meals you can’t have one more meal during the day.

Once people have more money than they need to take care of their basic necessities they do 2 things – one they try to save and two they like to move up in life by doing discretionary spending.
When discretionary spending starts to happen the GDP growth starts to multiply. In India from the time the per capita rose from $1000 to $1700 one major trend that is seen – last year the growth of Air Traffic has been faster than the growth in rail traffic. The per capita is expected to in the next 7-8 years hit $3000/-.  That is considered the poverty line in countries like the US& Canada for a family of 5.  But adding $1300 per capita into more than 1 billion people can mean such a huge uplift for India.
Just with the addition of $700 per capita (from $1000) even though the Indian economy does not seem to be doing very well, still you have most Metro airports and all the Planes and flights which I have taken recently completely full. Whether it is low cost Airlines like Indigo and Go air or full service Airlines like Air Vistara or Air India you don’t see empty seats. There is a waiting list for cars and 2 wheelers.  People are wanting to move up in life.  They have aspirations to be better than what their parents were.

So what does this have to do with financial freedom….

If more women come into the workforce they will add to the per capita income. Once they take care of the part of the burden of the basic necessities of the house, then they will end up spending on better education and health of their children and better quality products for themselves.

If you see trends like these and you invest in countries like India, which have a such a young demographic, you can be picking gems which can make you rich many times over.  Invest through SIPs in mutual funds or invest in Emerging Market funds, but systematically go about investing in growth stories and the growth momentum can propel your finances into a different orbit…

Till next time

Keep identifying trends