This is a sequel to the story of a girl who said ‘If I have 10 crores I will be rich’ story. This is a girl who got featured in Lokmat (Marathi newspaper) in a translated story. Here is the sequel. I had asked what could go wrong in the whole process.

Well the following things could go wrong:

1. She might stop her SIP based on somebody saying ‘markets are too high’ or ‘markets are about to fall’! – one of the worst crimes against compounding is the crime of stopping the process.

2. The property which she inherits may not appreciate at the rate of 10% p.a. which I have assumed. If interest rates in India are in the region of 7-8% and growth rate is sustained about 10% over the next 30 years (her career span) then the value of the house is like to reach say the levels that we assumed. Chances are we will not sustain such high CAGR rates for such long periods of time. Such high rates of CAGR cannot be sustained because of something called a ‘base effect’. Once a company or country reaches a particular size, the absolute growth may be good, but the relative growth cannot happen.

Also real estate as an asset class is impossible to predict because usage pattern changes. Her current house may have a single car park…soon tastes will change so people will pay fancy prices for a helipad, and other ‘necessities’ so even though real estate may go up, this location could stagnate…

3. She may give up her job- temporarily for having a baby or permanently as ‘husband is doing very well’  – and that could be the cause of her SIP stoppage.

4. Her husband may not want her to invest in equities – he may shift her to debt instruments – and she will go to sub-optimal taxable returns like her husbands!

5. This girl understands finance – hence the early start – but she has to keep herself updated and know how to make appropriate changes. Some active management skills (she actually has them) have to be developed.

6. Her parents may themselves remove money from the funds for her marriage – I am not saying it is right or wrong, but again this could be a genuine reason why the compounding got interrupted.

7. She may lose patience and decide to buy some luxury item with the accumulated money.

8. Currently all the accumulation and withdrawal are both free of tax..this may not sustain for a long time. So taxation can queer the pitch.

9. She may not keep track of the SIP payments and debits -for example the elss may lose shine if the DTC i s implemented in its current form. So some active participation may be necessary instead of a fill it fit it mode.

….readers are welcome to say ..what other reasons or causes exist…

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  1. subra you are right. Women abdicate the financial responsibility bit. If a father, brother or husband is even remotely connected with finance, they are happy to say ‘my father looks after my money’. It does not matter that he is a psu banker who thinks all ‘investments’ are risky and the whole world should keep all its money in a bank FD. Yes real estate will not appreciate..and agree with real estate risk. She may reach her target of rs. 10 crores if she keeps abreast of market changes, reads subramoney.com …only worry is her career span is likely to be longer than the advisor’s life span!!!

  2. the best thing is she has started..even if she stops after say 10 years…BUT DOES NOT REMOVE the money, she will reach her target. Important thing is to continue ….at least it accumulates some meat…

  3. any one off expensive/ big ticket expense– house renovation, trips abroad. touchwood- hospitalisation etc.

    or any change in income generation pattern– may not have the cash to spare if she begins her own business. or takes time out. or wants to work for an NGO or similar.

    Not so sure about investing and gender bias 🙂
    Specific data source to back this?

  4. no I have no gender bias data. I know women who succumb to their husbands bullying saying ‘let me handle’. I know women who will not give in. I know women who will give in to preserve domestic peace. I know fathers who dominate, I know fathers who listen.

    it is not a matter of brain power, education, etc….it is just there.

    not sure whether it is gender bias, education bias…etc. It is just that!!

  5. agreed Sukumaran…i think I will be in the planet only for another decade and a half…after that I will not know what happened to her money. L O L.

  6. Subra Sir,

    One of the readers mention that PSU banker thinks only bank FD is a safe investment and best investment. I also thought PSU bankers are dumb in equities. Recently while I was withdrawing my FD from a Syndicate bank, the banker appeared very concerned and asked me why. Me being frank as usual told him I looking to invest in equities rather than doing FD(the Subra money effect). Immediately he acknowleded my frankness and he was suggesting some excellent blue chip stocks already recommended by you. After that I changed my view of PSU bankers being dumb, even though they appear so. They pull your money into FD, but they keep them in equities I guess. It was an enlightening interaction with him. Even a private banker could not give the tips that he gave. LOL

  7. in life you end up generalising that is all. I have actually seen a bunch of deers chase away a tiger…in fact in one sanctuary there is a deer which chases away a tiger so regularly that the keepers know that deer 🙂 I know of psu bankers with decent portfolios..but they are the exception. I am aghast that you seek equity advise from a banker. The private banker has been more responsible. I am also feeling worried that this blog is seen as giving tips…I AM JUST SAYING what worked for me. I have a 60 year view on my equity portfolio..if you have 6 my portfolio or my strategies will not work for you. Caveat. Beware.

  8. Subra sir,

    Since I was away from the hussle and bussle of my work, just saw your reply now. As soon as I find time, I end up reading your blog. Even you write an article on how to eat food, you can count me to read it to completion. LOL. Sorry my reply portrayed your blog as a cheap stock tip blog, though it is only a communication error. In fact after reading your blog , I got to know what is an equity and confidence in investing in equities, or else Iam as good as dumb PSU banker as they say. I do know, in fact any regular reader of your blog knows of your good intentions and also your caveat and the long term view you wanted people to maintain on equities. And also I liked your trademark witty comparison of generalization to deers chasing tigers(never heard of it anywhere before.. lol).My Caveat: Even if it is subra recommending stocks(read subra’s investing mistakes), I do my own research on it(not easy to convince me these days) and also maintain long term view(not necessarily 60 yrs though… lol). Thanks.

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