Long term investing is lucrative

L&T ( 5 years, weekly)

Way back in 2004, a friend of mine sold his house for a consideration of Rs 40 lakhs. He wanted my advice about investing that amount. I had told him to pay his capital gains taxes and invest the remainder ( Rs 28 lakhs) equally in NTPC and L&T. He was not convinced and put his money in tax free bonds of NABARD.

Today his Rs 40 lakhs have grown to Rs 53.52 lakhs (CAGR 6%).
But had he invested in NTPC (from Rs 70 to 230)and L&T ( from Rs 182 to Rs 1682) then his wealth of Rs 28 lakhs would have grown to Rs 1 crore plus tax free. That is 30% growth every year.This is the power of investing in equities and staying put for the long haul. Actually 5 years is hardly a long haul. But with media and experts bombarding retail investors every moment, anybody has hardly any patience.

I wish people read this example and follow it for the next five years. There are many bluechips which are on the cusp becoming multi-baggers in the next five years. But one needs to have the conviction and staying power. We will be well rewarded.

Wish you a Very Happy Christmas and a Very Happy New Year 2010!

rgds
Vibhas

Buyers ought to be happy now

With the much awaited correction setting in buyers ought to be happy now. Consolidation in the markets indicates that strong hands are getting in and weak hands are getting out. While I can neither predict index levels nor time frames, I would be a buyer on all dips in specific stocks. IDFC at 140, Larsen at 1550 ( if at all), Reliance at 900, HDFC bank at 1600.

Food prices are touching new highs, interest rates are likely to go up, days of easy money will be short lived. This is good news for genuine buyers of equities because speculation could be curbed.
Extended trading hours means long working hours for those who participate in operational activities of the market. I wonder how this will help the retail investor. We will get to hear more ill informed advice from the TV channels for longer duration.

Long term charts indicate good future for Indian markets. So we stay invested till weekly charts tell us otherwise. One could book partial profits if cash is required for festivities this winter.

rgds
Vibhas