Except investing more and investing for a longer period mankind will do anything to increase its wealth.
Fairly obviously the person who starts early, invests more, for a longer period WILL have more money in the corpus assuming the same compounded annual growth rate.
So a person who starts at age 23 investing Rs 3000 a month, and keeps increasing by say 10 per cent every year and puts it in an index fund (growth option) will have much more than a person who starts LATER, invests a fixed amount (does not increase it regularly) and keeps money in say a PPF or a bank RD.
However when you ask people to do a SIP here are some things that you hear:
1. Will real estate not give better returns?
My reply:
a. You already have about 90 per cent in RE, so why more?
b. I do not know of any RE investment without leverage and allowing you to benefit by investing say Rs 50k a month. SIP can be done for an amount 1/100th of that.
2. I agree that if I invest Rs 100 a day for 30 years with a reasonable return I will have Rs 4 crore, BUT WHAT WILL BE ITS VALUE AFTER 30 years?
My reply:
Brilliant. I only know that it will have a much higher value than what you will have if you did not INVEST at all. Is that not good enough?
3. How can you be sure that ONLY equities will perform well over say 30-40 years?
My reply:
Sure it could be gold, silver, oil, horses, Dow Jones, Hang Seng could all take turns, but there is no fund manager IN THE WORLD who can do perfect asset allocation for you TODAY and hold it constant for the next 225 years. After all managers are mortal.
4. My father says equity markets are risky, and I should keep my money in PPF alone.
My reply:
Brilliant. What else did you listen to your dad to? Education? Marriage? Job choice? If the answer to these three are NO, NO, NO, then stop pretending. You find it convenient so you CLAIM to be listening. And if your dad has not exactly created at least about Rs 20-30 crore of wealth, why do you think of him as an Indian Buffett?
Illustration: Dominic Xavier/Rediff.com
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