Just keep in mind

Narasimhan A R

Here are the five rules which witnesses the success stories of many billionaires. No doubt a game plan is must before one get into investment decisions.

Rule 1: Early Bird Wins

Start investment at your early stage in life. Sooner is the better. This is because you allow growing your money for a longer time. This eventually results in huge outcome.

Today’s average Indian starts earning at the age of 18. From 18, if one starts saving Rs.1,000/- p.m at the interest rate of 8% for the next 12 year i.e., till his 30th year and allow it to grow till 60, his corpus would become Rs.30.04 Lacs. If the same person starts saving from the age 25 he has to save Rs. 1,747/- every month till he reaches 37, if he wants the same corpus of Rs.30.04 Lacs at the age of 60 .

Delayed start would require higher savings to reach the target else it would only fetch lesser corpus.

Rule 2: Compounding is the Key

Albert Einstein called “Compounding” the “Eighth Wonder of the World!”. To appreciate the power of compounding read on further:

‘A’ gives ‘B’ Re.1/- on day 1 with the condition that it has to be doubled at the end of the day and on 2nd day it has to become Rs.4/- and 3rd day – Rs.8/- so on and so forth. At the end of 30th Day could you make a rough guess how much it would be? It works out to whooping Rs.107.37 Crores. Mind boggling?

Even when you start saving a penny, over a period you will see a huge corpus in your kitty. Of course, Rome is not built in a day.

Rule 3: Invest. Forget. Reap Benefits

Here what I mean is do make long term investment plan – forget about short terms. Also forget in between up and downs. I bet the average return rates over a period of time, 10 years and above, would be striking.

Rule 4: Systematic and Consistent wins the race

Fixed sum of savings for a fixed period (say 10 years) without fail is what I mean systematic and consistent. When you want to be systematic and consistent the sure way to keep up this rule is make oneself committed to a stream of savings plan.

Rule 5: Don’t put all your eggs in one Bag

Let’s say you put all your savings in equity which gives 30% return .This may look high return option but do remember the risk is also embedded to this. I would say it is like a sugar coated pill. Hey I am not advocating against equity investment - Of course, it depends on ones risk appetite. On the other hand let’s say you invested all you savings in PPF, the risk is almost NIL, but it will not fetch you what you really intended. Here is where the importance of portfolio mix comes in to picture. There are lot of investment avenues available today – like Bonds, Equity, Real Estate, Housing, Art, Gold etc., One has to do enough home work before choosing right blend which will average out the return and risk.

My view is any investment decision without any of these principles may end up in futile.
The drive home point here is though one need not follow all the rules pointed above; just keep in mind these principles when you do any decision on investments.