Are you ready to digest some miracles that have happened in the Stock Market? I understand if someone had invested Rs. 10,000 in WIPRO in 1980, now the same is worth Rs. 400 Crores (Rs. 4 Billion). Is it a bluff? It is definitely not; the following figures speak the truth:
- 1980 (Original Investment of Rs 10,000)- 100 shares @ Rs 100 each
- 1981- 1:1 Bonus =200 shares (100*2)
- 1985- 1:1 Bonus =400 shares (200*2)
- 1986- split to face value Rs 10 =4000 shares (400*10)
- 1987- 1 :1 Bonus =8000 shares (4000*2)
- 1989- 1:1 Bonus =16000 shares (8000*2)
- 1992 - 1:1 Bonus =32000 shares (16000*2)
- 1995- 1:1 Bonus =64000 shares (32000*2)
- 1997- 2:1 Bonus =1,92,000 shares (64000*3)
- 1999- Split to face value of Rs 2 =9,60,000 shares (1,92,000*5)
- 2004- 2:1 Bonus =28,80,000 shares (9,60,000*3)
- 2005- 1:1 Bonus =57,60,000 shares (28,80,000*2)
- 2010- 2:3 Bonus =96,00,000 shares (57,60,000*5/3)
- Value of 96,00,000 shares as on Nov 2, 2010 @ Rs. 434 = Rs. 416.6 Crores
I went through this calculation more than once to see any error and to the best of my abilities there is none. This is indeed mind boggling. There can be similar examples in the likes of Infosys, another Indian giant. You may like to read my blog, ‘Time is your Friend, Timing is your Enemy’ once more.
In Stock Market, a multi-bagger is a share that goes up in price several times. It is right on your part to ask “How to identify similar ones for the future.” It makes tremendous sense to do your own research for this purpose. I know many of us may not have the required time, expertise and focus. The possible solution is to identify an expert (in consultation with your Financial Mentor), who can help you in this regard. The fee we pay to such a person will be really worth it.
The next question is how to allocate funds that can be invested in ‘possible multi-baggers’ and virtually forget about it for a period of 5 years or more. I have two specific thoughts on this:
- One needs to understand clearly that this is a ‘Risk capital.’ So, can you consider allocating a very small portion of your income (say 2%) specifically for such long-term investments? It makes sense to do this in consultation with your Financial Planner. Even if the entire amount is lost (which is very unlikely, when you have a good advisor), you should not have any regrets. I am sure you appreciate the term ‘Risk Capital.’ To look for windfalls without taking calculated risk is asking for too much.
- Another idea is to make use of unexpected cash inflows to the extent of, say 50 %, for ‘Risk Capital’. You may like to go through our blog, ‘Utilising Unexpected Cash inflows.’ As mentioned, you need to hold the shares for a long period without bothering about the fluctuations in the market.
In my opinion, this topic is extremely important in one’s wealth creation and Personal Finance. Stock Market and Personal Finance can never become a perfect science and will remain an art for ever. I am optimistic that I will come out with a few more refinements in the months to come. In the mean while, feel free to share your thoughts on this wonderful topic!
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