My First Lesson in Permanent Wealth When I Was 18 - The 5 Minute WrapUp by Equitymaster
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My First Lesson in Permanent Wealth When I Was 18

Aug 6, 2018

Ankit Shah, Research analyst

It was the summer of 2005, if I remember correctly.

I was visiting one of our close family friends in Gujarat.

I'd known my uncle and his family since I was a little boy. But all those interactions were mostly exchange of pleasantries and small talk about my studies.

On occasion, I heard my parents telling me to be like him. After all, he was a self-made crorepati even before he had turned 40. He had not only built a financial fortune, but he had also conquered time.

He started his day with a long, early morning walk; followed by yoga. After breakfast, he spent a couple of hours tending to the vegetable garden in his backyard. More recently, he had also started learning to cook.

He had all the time in the world to do whatever he liked.

But that's all I knew about him. I was curious to know the secret recipe behind his unusual success.

So, this was the first time I was visiting him without my parents. Initially, I was a bit shy and self-conscious around him. But he was quick to put me at ease.

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This time, he talked to me like he was talking to a young adult. He told me stories of his childhood... the financial constraints in his family... his inner struggles as a teenager... the ups and downs in his profession... and a lot more.

It was like he was narrating his autobiography to me.

I stood captivated... full of admiration... and lots of questions.

I wanted to know how he had built his fortune early in his life... how he had so much time to do as he pleased.

He read the expressions on my face and pre-emptively answered my questions...

  • You see, I get most of the credit for all the wealth that I have built. But I must confess that this is not true. If I had been the only earning member in our family, I couldn't be where I am today.

What? As far as I knew, he had been the sole bread-winner in the family. His father had stopped working a long time ago. His wife was a home-maker. And his daughter was still studying. Who was he talking about?

He continued...

  • I did the math very early in my career and figured out that with just one working-member in the family, I'd have to slog through the nine-to-five routine all my life. And that was not a happy feeling.

    I realised that to build long-lasting wealth, I had to find another working member in my family. My search led me to the most profound wisdom that no school or college ever taught me.

Excitedly, he held my hand and led me to his study room. On the soft board above his desk, he pointed me to a numerical table. I don't remember it accurately, so I've recreated it in my own style...

The Wealth Compounding Table

Compound Annual Growth Rate Rs 10 lakh Invested for 20 Years
4% Rs 21.9 lakh
6% Rs 32.1 lakh
8% Rs 46.6 lakh
10% Rs 67.3 lakh
12% Rs 96.5 lakh
15% Rs 1.6 Crore
18% Rs 2.7 Crore
20% Rs 3.8 Crore
25% Rs 8.7 Crore
30% Rs 19 Crore
Source: Equitymaster

Then, almost as if he was revealing me a secret gospel truth, he said:

  • Do you see it? Most people are short-sighted and predominantly focused on only saving their money. They don't understand their 'capital' has the power to be one of the top earning members in their family.

    I started investing in equities in a regular, well-disciplined manner early in my career. Of course, it was a bumpy ride. There were good years and bad years. I made mistakes and learnt many precious lessons. But I was confident that this was one of the best ways to create long-lasting wealth.

    Over time, I realised that sustaining wealth was just as important as making it, if not more. So, I learned to stay put when others panicked. And in times of excesses, I avoided the lure of quick gains. The compounding worked so beautifully that after one point this new "earning member" was doing even better than me.

    It lifted the burden off my shoulders and gave me the freedom to live my life on my own terms.

    That's how I built permanent, long-lasting wealth.

This was a defining moment in my life. I never forgot this conversation.

I thought of penning it down because I was reminded of it recently when my colleague Tanushree told us about her new exciting strategy for building permanent wealth that she has been working on for the past few months.

She's drawn a compelling blueprint that could be the springboard to long-lasting wealth.

And today, she is ready to share it with you.

Join Rahul Goel, CEO of Equitymaster, for an online video presentation, where he will reveal Tanushree's blueprint for permanent wealth.

We're calling it the Permanent Wealth Blueprint.

I hope you grab this opportunity to launch your journey to permanent wealth.

Chart of the Day

The IPO of HDFC Asset Management Company closed on Thursday, 27 July 2018.

At the end of the third day, the IPO was subscribed a whopping 83 times!

It listed today at a 58% premium.

I'd recommended my Insider members to subscribe to the IPO given the rock-solid fundamentals, top notch management quality, and the massive demand for the IPO. In fact, I even showed my readers how they could make two application via the HDFC shareholder reservation category as well as the retail category.

Now, the question is: Why such a crazy rush for this IPO?

The short answer is the HDFC brand. The HDFC Group stocks have been such phenomenal wealth-creators that no investor wants to miss any opportunity to pick up a stock with the HDFC brand tag.

Today's chart of the day shows the number of times you could have multiplied your wealth by being an early investor in any HDFC Group company.

The HDFC Group of Multibaggers...

*Returns calculated since: HDFC Ltd: 4 Jan 1990; HDFC Bank: 26 May 1995; Gruh Finance: 28 Jan 1993; HDFC Standard Life Insurance: Nov 2017 Issue price

In the chart above, I've taken the earliest available prices for HDFC Ltd, HDFC Bank, and Gruh Finance. The returns translate as below:

HDFC Ltd delivered compounded returns of 28% over 28.6 years.

HDFC Bank delivered compounded returns of 27% over 23.2 years.

Gruh Finance delivered compounded returns of 22% over 25.5 years.

HDFC Standard Life Insurance delivered absolute gains of 75% in a little over eight months from its issue price of Rs 290 per share.

In my premium newsletter Insider, I'd also recommended one HDFC Group company as a long-term investment. It's currently slightly above the recommended maximum buy price. But should it correct, it could be a lucrative opportunity to build long-term wealth.

Happy Investing,

Ankit Shah
Ankit Shah (Research Analyst)
Editor, Equitymaster Insider

PS: Dear reader, we just went live with a video message revealing full details of Tanushree Banerjee's secret permanent wealth project. We strongly recommend you don't miss it. You can watch it here: Tanushree Banerjee's Permanent Wealth Blueprint.

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