What can 14% p.a. returns do!!

What can 14% returns do? 

Let us see...

In 1971, Govt’s Enemy Property Office had shares worth Rs. 29 Crores value, mostly belonging to people who left India during Indo Pak war of 1965. In the year 2015 i.e. 44 years later, the shares were valued at 10,000 Cr. 

That is approximately 345 times in 45 years!

Can you imagine what return per year it must have taken to grow by 345 times? 

Approximately 14%, that is all.  

Over 44 years that 14% made 29 Crs turn into 10,000 Crores !!  This was a static investment on which nothing was done,  This 14% p.a. returns is not counting the Dividends that would have been paid out on these shares. 

This is what equities can do over long periods of time, create real wealth. !! Holding for 20 or 30 years can create wealth; buying and selling every 1- 2 years will create lots of paper work and not wealth !!

Moral of the story: 

Invest for really long periods to create wealth

Source for the news on Enemy Property:

http://www.business-standard.com/article/markets/enemy-shares-to-be-dematerialised-115041700037_1.html

Simplest Way to Create Wealth

To build wealth, most people try to take short-cuts and end up wasting their time or squandering what little wealth they have. Make no mistake, there are no real short-cuts unless you get lucky and win the lottery.

The foundation of building wealth starts with establishing the right mindset and following through on a few basic principles.

The first & most basic principle that anyone who wants to succeed in investing should understand is the Concept of Compounding..​​

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”

Compounding of returns happens when both your initial investment amount and the accumulated returns grow together!! Therefore, Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. 

Thanks to compounding interest, it doesn’t really take much to build your wealth over time. The key to amassing a fortune is by constantly contributing to the overall pot as often as possible and allowing the money to work for you and grow itself. Remember that it doesn’t take much additional money to have a profound effect on one's wealth. Covet your cash and don’t let go it too easily. Before you make a frivolous purchase, consider the ramifications on your overall future wealth.

Look at the Compounded Returns Formula below:

If one looks at the equation carefully, one can observe that 'Time in Years' has the most impact on the accumulated amount. Yet, so many individuals focus on 'Principal' & 'Rate of Interest'.