8/8/2019 Steps to Wealth Creation

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Rs 9500 invested in 1994 is worth Rs 3.5crores now. Unbelievable, yet true!

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Certain things in life have to

be experienced to believe.Consider this: Infosys

Technologies made their

IPO (Initial Public Offering)

in 1994. The share was

priced at Rs 95. All investors

who applied for shares

got allotment. Since going

public, this great companyhas created enormous wealth

for investors. After ve

bonus issues and a stock

split, the original 100 shares

have grown to 12800 shares.

At the current market rate,

this is now worth around Rs

3.5 crores. If we include the

several lakhs that Infosys has

given as dividend to the share

holders, the amount will be

much bigger. It is interesting

to note that the same amount

of Rs 9500, if deposited in a

bank (xed deposit) in 1994

would now be worth around

Rs.38000 only.

To cite another example:

Rs 10000 invested in

Geojit IPO in 1995 is today

worth Rs 12.4 lakhs and

the investor would have

received Rs 133450 ( more

than ten times the original

investment) as dividend, tilldate. Investment in blue chip

stocks has created enormous

wealth for investors. Mutual

funds also have rewarded

investors handsomely. For

instance: an investor whohad invested Rs 1 lakh in

Birla Sunlife Tax Relief 96

in March 1996 would have

received Rs 21.6 lakhs in tax

free dividends alone by June

2008!

This story of phenomenal

wealth creation might soundunbelievable for a person

without any exposure to the

capital market. Therefore, it

is important that investors

should be introduced to the

capital market if they are

to participate in and reap

the benets of this wealthcreation.

However, investors should

be guarded against risks

of investing in low grade

companies. An investment of

Rs 1.8 lakh in HFCL in 2000

is now worth only Rs 1200.

Direct investment in stocksrequires nancial expertise,

time and inclination. Most

investors may not have that.

For them, indirect investment

through the mutual fund

route may be ideal.

Mutual funds, particularly

Equity Diversied Fundsthat invest predominantly in

stocks have given attractive

returns to investors. As on

30-07-2010, thirty one equity

diversied mutual funds in

India have given an annualaverage return of more than

22% during the last 5 years.

It is important to note that

these are tax free returns.

Unfortunately, the fact

that such fabulous returns

are available from smart

investments is not knownto the vast majority of those

who save and invest.

A safe method of investing

through the mutual fund

route is by choosing a

Systematic Investment Plan

(SIP). Systematic investment

plan, as the name implies, isa disciplined and systematic

method of investing in

stocks. Here, the investor

invests a particular amount

(as low as Rs 1000) at regular

frequency, say, every month.

An ECS debit arrangement

with the investors bank willmake SIP very convenient.

The great merit of SIP is that

it absorbs the volatility in

stock prices. When market

declines investors get more

units thereby beneting

them in the long run. In the

context of the emerging Indiagrowth story, SIP in equity

diversied funds would be

a good investment idea. So,

SIP and grow rich!