The tortoise wins the race!

Last October my parents became grandparents and their whole life seems to have changed. And yes, I too became "mama" (uncle) and my life too seems to have changed. During the course of last year I understood the meaning of "Muddal Karata Vyaj Vhaloo". Interest is lovelier than the Principal. And that's true for most of us.

I really bet, my parents will be happier after they become "grand"-grandparents; and so we arrive at the last basic LAW (after "Save 10% of what you earn" and "Ride on PoC") I would say is necessary for any person to do well in investing- Interest earns more Interest.

However, that wich matters more than the "laws" is Consistency...

Most of the times all of us start everything in a Big Bang style. Oops... for the last two weeks I have been reading articles on vibeindia and that guy(guess who? :-) ) who writes on investing says, "just save for FIVE years and in thirty-five years you will have a Crore Plus..."
Well, some of us may have already started saving something... That's great..... Now, what is important is to do the same for the next FIVE years!... or even more..., which will make you a crorepati, much earlier.... But remember its not just five years. It's SIXTY months! and even more.... To put aside 10% every month... there lies a real challenge... To be a millionaire we have to win this challenge....

I have a very recent example. Around June, one of my colleagues who is interested in Big Bang money asked me, "jigu bhai bataw main paisa kahan lagau? I have money and want to invest it in Mutual Funds; suggest some...". I said, if you want to invest money first tell me how much of the money you will need in Six Months, how much in Two Years and how much in Five Years. Based on that I adviced him to invest the amount in different CLASSes of mutual fund schemes. He expected his money to be in Five Figures.

Now, oops! Since then, he has not put "a single rupee" in the plan he had agreed upon! The reason- the job is tedious. Every month putting away FOUR Thousand bucks is a more difficult job than putting Rs. 48,000 in a single shot. If you see his investment, currently his equity fund investments are doing well but not the debt fund; they are negative( you can ask how a debt fund can give negative returns? those technicalities later on but they can give negative returns).

The point is he had a Plan, but he could not stick to it. Many reasons would be there and that will come to everyone who tries to follow the "consistent investment approach". It's difficult...it's boring...it doesn't have the charm of gambling...it's a slow process...but it's IMPERATIVE!

And that's why what matters is: Consistency.... Yes, Consistently save 10% of whatever you earn.... and that will bring you your first million.... Its a difficult job but that's why they say.. "To be a millionaire is not an easy task!"

If you really do something consistently then even mathematics supports you.... and here I will come to my favorite theory of STOCK markets....(Yeah!!! now its interesting stuff... STOCK Markets!) To succeed in STOCK Market, the best way for a lay man is to invest an equal sum "every month"... Forget about where the market is... forget what your uncle is saying... forget what your broker is saying.... Just follow this and I assure you.... in next five years or so you are a millionaire....(I will discuss the theory later, for now I just want to stress on Consistency!!!) Statistics call it.....the STRONG LAW OF LARGE NUMBERS.....

So, here we end with the last basic Law and that is: Consistency. No Matter what will happen, what I have kept aside as savings I will not use it... It is just for giving me my first Million.

In India, which money generating activity attracts nearly the same kind of Income Tax Rate as Farming ?
Check out the answer next week!


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