Why Stock Markets?

September 6, 2011   ·   0 Comments

Lesson 1:

People generally asks why Stocks & Why stock market investment? Stock Market is a risky bet & many people believe that it is better to invest in www.stockssavvy.comdebt instruments such as FD’s, RD’s rather than to invest in stocks. But let us see the & the power it can grow to when it is put in .

How much can you make in 26 years by just investing Rs.10,000 initially in any of financial instruments ? Take a wild guess ???

Let us look at the real example…

If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…

  • In 1981 company declared 1:1 bonus = you have 200 shares
  • In 1985 company declared 1:1 bonus = you have 400 shares
  • In 1986 company split the share to Rs. 10 = you have 4,000 shares
  • In 1987 company declared 1:1 bonus = you have 8,000 shares
  • In 1989 company declared 1:1 bonus = you have 16,000 shares
  • In 1992 company declared 1:1 bonus = you have 32,000 shares
  • In 1995 company declared 1:1 bonus = you have 64,000 shares
  • In 1997 company declared 1:2 bonus = you have 1,92,000 shares
  • In 1999 company split the share to Rs. 2 = you have 9,60,000 shares
  • In 2004 company declared 1:2 bonus = you have 28,80,000 shares
  • In 2005 company declared 1:1 bonus = you have 57,60,000 shares

At the end of 2005…

•You have 57,60,000 shares of the company

Any guess about the company ?  (Hint : Its an Indian company)

Any guess about the present valuation ?

The result of ‘Power of Compounding’

Your present valuation is about Rs. 200 Cr.+ & The company is ‘WIPRO

Other such examples…

CIPLA: Investment of Rs. 10,000 in 1979 will fetch Rs. 95 cr.+

INFOSYS: Investment of Rs. 10,000 in 1992 will fetch Rs. 1.5 cr.+

RANBAXY: Investment of Rs. 1000 in 1980 will fetch Rs. 1.9 cr.+

This analysis was done in 2006. In the last 5 years, most of the companies have doubled from their 2006 levels & also given them dividends. This is reason one should invest in equities.

Another point here to keep in mind is all these stocks made money for people because they have been kept for long term. No technical levels mattered when it comes to long term investment & because the management of the companies stand apart from the herd, these companies grew in profits & revenues year after year.

[poll id=”4″]

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

More Posts - Website

Follow Me:
TwitterFacebookLinkedIn

By

Recommend on Google