Ever thought about what you’d do if you suddenly got a windfall of cash? Maybe buy the latest smartphone, a cool bike, or even stash some away for a rainy day? Well, what if I told you that learning to manage and grow your money could lead to not just one, but many windfalls over your lifetime? Intrigued?
When the investor is young, as we are, you and I, every single rupee makes a substantial difference. That 500-rupee pizza? If you saved the money and invested it, it would probably turn into ₹ 1,25,000 by the time you retire at 65.
Yep — 1 single pizza at 18, could be worth 1.25 Lakh on retirement.
Now, times that by the number of times in a year you eat pizza. 500 x 12 x 3 = 3 years of pizzas, about 100,000 calories, and about ₹ 50,00,000 (60 lakh in lost savings!).
Granted, I’m being a bit melodramatic here. Inflation-adjusted, the value will be equal to about ₹10,00,000 (10 Lakh)[Calculation 1] in today’s money. And I’m not just pulling numbers out of my ass here — all my calculations will be shown.
If you see a superscript number (like this), it means that you will find the relevant calculation will be shown at the end of the book in a section called “Calculations’.
So you see, if you are currently 18, and you save that pizza money till you are 21, and invest it, the value will be about 60 Lakh INR when you retire at 65. Here is what you have if you save your 500 rupees per month from age 18 to age 21:
And now, if we take this money on your 21st birthday, and invest it at 13.5%, this is what you will have on your 65th birthday:
Fifty-Seven Lakh INR. Assuming inflation of 4.5%, roughly worth 9.96 Lakh INR today. [Calculation 1]
And that was just your monthly pizza. Let’s reduce your monthly movies from twice to once a month. Another 500 per month saved there, another 60 lakh in your retirement vault.
Next, let’s kick the cigarettes — be honest, we’re all college kids here. Another 500 saved there each month, another sixty lakh on retirement. The drinks, another 500 per month, another 60 lakhs.
Why am I being such a bore? To show you that small changes can lead to massive savings in the long run. Just three years of sacrifice not only helps your health, but results in a net of 2.4 CRORE INR at age 65.
It will be even more, much more if you kick these habits forever, and on top of investing that 3-year savings lump sum of 22,040.72 INR at age 21, you keep investing your savings each month.
So if you invest this 2,000 per month savings (500 from eating out, 500 from movies, 500 from cigarettes, and 500 from drinks) every month, from age 21 to age 65, how much money will you have?
Take a guess. Close your eyes, and use your rational brain to think up an answer.
Ready? Here it is.
6 Crore, Fifty-One Lakhs and change, and that’s just by doing nothing except bettering yourself.
And that, gentlemen, is the crux of my argument in writing this book. If that’s all you came for, wonderful. Making these four small changes to your life can assure financial freedom for you, and your family.
Even if you get “stuck” working a 9-5, just 2,000 rupees per month will leave you wealthier than your wildest dreams.
Now, two things; firstly, this is what we call a “synthetic test”. All years will not give you the 13.5% return, which admittedly is a moderately high rate to expect.
However, India is an emerging market that has steadily grown over time. In fact, the NIFTY 250 Smallcap index has shown a 18% return in the past 10 years, so we can be decently optimistic.
Secondly, some years will be recessional, but staying invested despite the lows is where the money is made. In the past 25 years, if you stayed invested in Indian markets for 7 or more years, the MINIMUM return percentage was 5%, and that was in large-cap investments.
Also, that was the minimum, with 98% of investors who hold for 7+ years making above 7% returns per year, and 82% of investors making gains of more than 10% each year.
I guess HODLing has its benefits — and don’t worry, by the end of this book you will understand that joke, maybe even laugh at it.
Look at the following dataset:
Source: The FundsIndia Wealth Management Report, June, 2023
Some people will tell you that targeting a 13% return over four decades is impossible — and you should respond by telling them that you only take advice from people who will be alive 40 years from now.
Look at another dataset:
Source: The FundsIndia Wealth Management Report, June, 2023
As you can see, the mid-cap and small-cap segments have given an average of 17% to 19% returns over the past 10 years.
But, we are getting ahead of ourselves here. What the hell is a ‘NIFTY 50’, a ‘large-cap’, ‘mid-cap’, and ‘small-cap’, you ask. Well, that, and a whole lot more is about to be explained in this book.
I’m Donovan Figg, and I’m going to teach you the little bit that I have learned in the past five years as a young investor.
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