150 Wealth-Creators

Many potential investors shy away from parking funds in stocks because of the assumption that this form of investment rides on high risk factors. While it is true that volatility is the name of the game in the stock market, equally true is the fact that disciplined investors who have adopted the right strategies have now become wealthy icons. So, how do you go about it? DSIJ Team highlights the factors that you need to take care of while foraying into the stock market

The year is 2004. In the bustling heart of Bangalore, amidst the aroma of filter coffee and the rhythmic notes of the keyboards is Rahul Rao, a young software engineer with dreams painted in pixels. Unlike his tech-savvy peers, Rahul has always harboured a secret fascination with the stock market, a world seemingly shrouded in mystery and risk. Fuelled by curiosity, he then embarked on a journey that would not only transform his finances but also redefine his perception of wealth creation.

Rahul’s first brush with equities was through his uncle Ashok Hegde, a believer in long-term investing. He explained to Rahul how even small amounts of investment in diverse companies could help him to become wealthier over a given period of time. Investing in a diverse set of companies would help him spread the risk and create higher potential for profits. With trepidation, Rahul started investing ? ₹1,000 per month in five blue-chip Indian companies. He selected those five companies based on his uncle’s advice who had already conducted some research into their business operations and management.

The example of Rahul Rao indicates that the route to becoming wealthy looks simple enough. Over the past four decades, the Indian stock market, represented by BSE Sensex, has averaged an annual return of about 16 per cent per year. So, every ? ₹1 lakh invested at the start of 1980 would have yielded a whopping ₹7.1 crore now. Compare this with the return of less than ₹1 crore had the investment been made in fixed deposits. That is because the yield would have been only 11 per cent at a compounded rate. In terms of simple returns, it would have been even lower.