Patience and Motivation

By V. Muthu Krishnan

Miracle of Nature

Let us watch how the “chinese bamboo tree” grows and let us learn from nature.

Life Lessons of The Chinese Bamboo Plant.3gp

Take care of your HealthHealth should be given the highest importance, earning, saving, investing can wait.

India is the diabetes capital of the world and life-style related diseases capital of the world.

Hypertension, obesity and heart disease is increasing at an alarming rate.

Health is wealth – feel good and finance.

Make it a habit to exercise by walking briskly for 30 – 45 minutes 4 to 5 days a week.

Watch your diet. Avoid junk food. (oily foods, sugar, sweets etc.)

Effect of being rewarded moreLet us consider the hypothetical situation of three employees with a starting salary of 5 Lakh Rupees over a period of 20 years.

Every year, your manager decides to distribute the increment budget into three buckets

1. 12% for above-average performers2. 10% for average performers3. 8% for below-average performers

Using FV functions in excelAbove-average performers salary reaches 48L Average performers salary reaches 33LBelow-average performers salary reaches 23L

Above-average performer earns 50% more than average performer and 100% more than below-average performer.

InvestingThis is your secondary area of focus.

Build a plan and invest accordingly. Do not swing with the times.

Be passive, check your account once a while. Let your money compound along with your career.

My journeyIn

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Inv. Price

running average cost

Investing during yearly highs and lowsIf one person had always invested a fixed amount in the sensex on the day of the yearly high every year and another person always invested the same amount in the sensex on the day of the yearly low, their CAGR returns at the end of year 2014 is 12.4% vs 16.11%. This is from the period 1996 to 2014

10-yr rolling returns91-01 9.70%

92-02 -4.63%

93-03 1.04%

94-04 2.09%

95-05 4.49%

96-06 7.85%

97-07 10.33%

98-08 5.94%

99-09 4.56%

00-10 9.78%

01 to 11 12.98%

02 to 12 15.10%

03 to 13 11.40%

04 to 14 11.66%

Worst-case scenario: Bought at year high andSold at year low.

Average is 7.31% CAGR returns

Corrected for dividends!!91-01 11.70%

92-02 -2.63%

93-03 3.04%

94-04 4.09%

95-05 6.49%

96-06 9.85%

97-07 12.33%

98-08 7.94%

99-09 6.56%

00-10 11.78%

01 to 11 14.98%

02 to 12 17.10%

03 to 13 13.40%

04 to 14 13.66%

Dividend yield is assumed to be 2%. Average improves dramatically to 9.31%.

S&P 500 average annual returns

Source: http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm

S&P 500 10 yr rolling returns (bought at yearly high and sold at yearly low)

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55

-10.00%

-5.00%

0.00%

5.00%

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Series1

Adjusted with 3.6% dividend . Average is 8.19%