If you are from an average middle-class family then probably you have listened from your parents that money does not grow on trees. Have you ever thought why they say this? This is because they did not plant the tree which will grow money on it.
Now you might be thinking about which tree I am talking. I am talking about investing. Investing is the science of multiplying your money.
Warren Buffett has once quoted “Someone is sitting in the shade today because someone planted a tree long time ago”. You can relate this analogy to investing.
You can think SIP(Systematic Investment Plan) or regular investment in Stocks as the seed of the tree which will grow money in the future and will make you financially stable.
Parag Parikh views on investing “You cannot sow something today and reap tomorrow! A seed has to go through the various seasons before it turns into a fully grown tree. So is the case with investing”.
In this blog, I will only talk about how to compound your hard-earned money with the stock market investment.
1. You Need To Start Investing
No doubt, compounding is the eighth wonder of the world but you will only be benefitted from compounding if you will invest.
Your knowledge is of no use if you will not take action. If you will take action then you will commit some mistake because no matter how careful you are, the one risk you cannot eliminate is the risk of being wrong and if you will learn from your mistake and will not repeat the same mistake then you will be a successful investor.
₹ 1000 invested per month for 40 years at 8% per annum interest rate will be ₹ 31 lakh, a decent amount to live your life comfortably and much better than many people who end up having nothing for retirement.
Since I am talking about Share market investing the interest rate of the Nifty index fund on an average is about 12% to 15% way more than 8%. At 12% per annum, the value of your ₹ 1000 per month investment after 40 years will be ₹ 92 lakhs and at 15% per annum, it will be near ₹ 2.13 crores.
Take your time and learn the power of compounding and investing. If you are a beginner and want to learn to invest then read “learn to earn book“. Don’t waste your time doing shit thing friends because you and we are the future of our country. Learn to invest as it will be beneficial for you as well as our country.
Start investing even if you are an employee with a mediocre salary. Let’s assume your salary is ₹30,000 per month then you should invest at least 10% of your salary i.e ₹ 3000 should be invested the same day your salary gets credited and manage your expenses with remaining ₹27,000.
I know its difficult at first but trust me, in the long run, you will thank yourself for your discipline. If you will remain disciplined then only you will know the power of compounding.
Investing in Stocks means you are buying a business and a business has to go through many ups and downs and it takes years for the businesses to grow and expand and hence it takes time for your stock investment to grow big.
2. You Must Be Disciplined
Getting started with investing is the first step towards compounding your money but being disciplined is the most important step.
Discipline is the key to making your investment successful. Suppose you started investing in stocks but after a few months you will sell your investment for spending money on liabilities then all your work will go in vain and that’s why it is important to be disciplined.
Investing consistently and remained invested in stocks of a fundamentally strong company will help you compound your money and will make you financially healthy.
Being disciplined also means that you need not make frequent buy or sell decisions by simply watching the so-called experts on business TV channels. Do your research and do not sell your stocks until the fundamental of the company deteriorates.
3. You Must Be Patient to grow your money.
You must have come across a quote “ Time is Money” and the legendary mutual fund manager Peter Lynch has revised this quote to “ Time makes money”.
In Stock investing it is the time which makes money. If you will not wait for businesses to grow and expand then how your business investment(Stock investment) will grow.
While browsing Twitter I came across a post which shows why patience is very important. You can see the screenshot of that post below.
Now, I know you must have realized the value of patience. If anybody ever tells you that a stock that’s already gone up 10-fold(10 times) cannot possibly go higher, show that person Walmart stock.
In 1970, Walmart went public with 38 stores. Five years later, in 1975, Walmart had 104 stores and the stock price increased 4 times. In 1980, with 276 stores, the stock price increased to nearly 20 times. If someone holds this stock from 1980 through 1990, he would have made 30 times again that’s why it is advisable to be patient.
I know you might be thinking that Walmart is an American Stock how being patient will help me in India. For that let’s take the example of Maruti Suzuki. In 2014 the share price of Maruti was nearly about ₹ 2400 and in 2018 the stock price reached nearly about ₹ 9900.
If someone would have invested in Maruti Stock in 2014 he would have quadrupled his money in 2018.
PVR, a film entertainment public ltd company is a well-known listed company in India. PVR share price was ₹ 116.4, less than the price of a movie ticket in PVR, on August 25, 2009, and in 2019 the share price of PVR is nearly about ₹ 1700. PVR share turned an investment of ₹1 lakh into ₹13 lakh in 10 years. This shows how patience helps in compounding your money.
One last thing I would like to include is that everyone should learn to invest to get benefitted from compounding. Investing your money will bring the money into the economy and will be better for the economy of our country.
All the stocks used in this blog are just for education purpose and not a buy or sell recommendation.
Thanks for being patient and read my blog. I hope you will plant the seed of investing soon to become wealthy.