One young fresh MBA girl walked up to me and said ‘I want to get really rich…if you give me just 1% of your wealth, I will be rich’.

I said, I will make you rich and teach you to get really wealthy, WITHOUT giving you anything, but by just teaching you…HOW to get rich. She said yes, started a SIP…and is now not in touch. Of course her SIP is continuing but that is just the beginning. She had no clue how much money a person needs to be be called ‘rich’. So I will leave the 1% joke aside.

Here are my tips to get wealthy:

1. Make copious notes. Just write down all your financial thoughts. For example I am happy with 3 calls that I made in the last 3-4 months. I bought Tata Motors DVR, Cummins – both doing well in foreign markets. Also decided NOT to buy Mahindra Holiday Resorts – the improvement in sales is just not happening. As of now I am right and happy. However I need to keep writing down why I did things. This helps in knowing how much of life is luck (mine is about 90%), knowing the right numbers on the telephone pad (of people who will pick up), research, good broker, etc….

2. Know your numbers: When you invest write down in an excel sheet or elsewhere and find out how much returns you are getting. Remember so far I may have got a 60% return in Tata DVR, but over the next 24 months it will fall to a far lesser number like 20% (this is magnificent but much lesser than 60%). Your mind registers the 60% and believes it FOREVER. That is why my 70% CAGR in coromandel international looks great. Also my 19% in Cholamandalam looks good because it also has a 7% dividend return…the total returns are fantastic, are they not?

3. Invest in only what you can understand, but EQUITIES are a must: debt investing is easy to understand – you get 8% every year, but equity can give you 40% in year 1, then 8%, then -6%, then 2%, then -4%, and 10%. This comes to 12%. However if you got rid of it at the end of 4 years, you may have got less. To understand equity you need to understand basic concepts of statistics – mean, median, mode, standard deviation. You also need to understand co-relation, so that when the ‘experts’ on media say that oil is going up because dollar is going down, you can say chuckle, chuckle and watch ‘masti’ channel like I do.

4. Investment is like a religion – and expects you to strict rules and regulations. There have been many gurus and each one choose a different path. Read all of them, but chart your own path. I have read Buffet, Graham, Templeton, Fisher (both father and son), heard Vallabh Bhansali, Chetan Parikh, Sampath, Parag Parikh – not sure how much I have copied. Trying to copy any one from such a far away distance is not only tough but also foolish, is it not?

5. Trust your adviser, broker, agent….but Verify till you are sure. Then trust him blindly. I reached that stage with my broker (adviser) in 1979.

Sure there are others like start early, learn compounding, do asset allocation,…….but these 5 steps are as important…

 

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  1. Such a gem of an article. Have been thinking hard about the 4th point for some time now, after reading few of the greats you mentioned.

  2. Sir, just to play devil’s advocate can we make multi-baggers using the SIP funda? Definitely the risk is that from multi-baggers it can turn out to become multi-paupers also 🙂

  3. Chandrakant Dhuutadmal

    Subra, I was wondering if you can tell us or atleast give a hint as to who your broker/advisor is ? I have even asked you in the past if you do advise small investors like me on paid basis ?. Thanks.

  4. I wish more individuals would make it a goal to have an adequate amount of money and all-round fulfillment rather than the blind race of being rich. We need to get the definition of “rich” correct before we start on that journey.

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