How many of you have grudged your friends who say “My father had bought a flat in Santacruz for Rs. 200,000 in 1977, now it is worth Rs. 30,000,000” – surely you felt pangs of jealousy did you not?

Did you think – if I had this I could have retired instead of suffering this boss? You bet!

Did you know that unfortunately you cannot set the clock back? Which means even though this information about a flat in Santacruz is accurate, it is completely (well almost) useless information!

And since you cannot cry over spilt milk, let us at least cry over Vodka or Champagne.

Instead of buying a flat in Santacruz if your friend’s father had invested this amount in equity shares of Wipro it would have been worth, hold your breath Rs. 8100 crores (apart from the dividends that you consumed for your lavish lifestyle).

I am not sure about prices in Santacruz, but surely for Rs. 8100 crores (now tax free, viola!) you could have bought a sizeable chunk of Santacruz – or so I think!

And Wipro is not alone. Bajaj Auto, Hindustan Lever (Oh yes inspite of not participating in the ’02 to ’07 boom), Reliance, Cipla, Nestle, Ranbaxy….would have all done that.

If you had done a SIP in the equity index (sensex assuming you could buy from 1977) on a dividend consumed basis your returns should be in excess of 20% per annum. Not bad even considering that during some of those years inflation was at 12-15% p.a. It is still far ahead of Santacruz. Approximately 2 times as much.

Lesson number 1: Do not cry

Lesson number 2: If you insist on crying, cry for Champagne not milk.

MOST IMPORTANT LESSON:

You cannot set the clock back for sure. Start NOW. Start saving in a good equity fund. If you cannot choose a good fund, do a SIP in the Sensex. The last time I saw Templeton had one of the cheapest Index funds (buzz me I will give you my Arn code, if you want). It is equity (business) that gives better returns than gold or real estate.

Ask yourself the following questions:

– did I have Rs. 10,000 to invest in 1980 (ok ask your Dad or Grand dad as the case maybe)
– would have I had the patience to hold it on for 34 years?
– would I have been happy with my money DOUBLING in 3 years and sold it off for Rs. 20,000?
– would I have sold it off at Rs. 50 lakhs thinking ‘It cannot go up further’ and then put that amount in a tax saving bond?
– would I have sold it partially to invest in Silverline? Worse than that would I have sold everything and invest that in Silverline or Crest Animation?

It is not easy to make money in the share market if you are too intelligent by half. It rips you apart.

Never said Equities is easy, but I can assure you, it has created wealth.

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  1. Subra,

    Apartments do not appreciate much in Bangalore compared to land prices. I do agree with Gunda that land prices has been greatly appreciated.

  2. Subra,
    I also live in Bangalore and I tend to agree with Gunda’s views on land price escalation for the ones bought between 2001 to 2005. In hindsight, that was the period Bangalore RE was in the early phase of its real estate growth and the prices were somewhat reasonable/affordable and since then the land rates have skyrocketed in places like South Bangalore. I support this based on my two land investments done during that period. One yielding a CAGR of 23% and another yielding 15%. Even a land investment done during that period in a tier-3 town in TamilNadu(a taluk HQ) has yielded 20%

    Also I had let go of one apartment buy that I was close to buying in one of the tier-1 developer project in 2013 in Bangalore as my parents were not convinced about spending so much for the ‘hole in the wall’. But the same property’s CAGR is again a good 15% now as one of my friend has bought that time.

    One can argue that I could have got more had I invested in Equity .But I am not complaining the RE land yield though !!!

    However , I have also heard of horror stories in fraudulent land deals where the same land was sold to multiple people, or the great-grand children litigating the land that was sold years ago. or worse someone selling grant land/Govt/lakebed to gullible buyers, in-ordinate delay in apartment completion, poor quality land titles, construction , etc, etc. These are real risks and I believe they are no different than Satyam, Silverline and other stock market scams/risks.

  3. Guys we have always believed GORA…IS IT NOT ?AND one such RE Gora Trump sab is saying Mumbai RE prices are indeed low…Opprtunity for Those of you who believe in RE…Mumbai RE in general and Trump sab in particular is waiting for your wallet..Renters like us will also be greatful to you…More Parcels are always good for Renters like us…It allows us to Give our EMI money to Naren,Prashant,Siva and gives you Long term Good Renters who give you a renting yield of 3 to 6 %….When a RE Investor in YOU is comming to Mumbai ?

  4. Dear Subra,

    Nice article.few things-
    Direct equity investment by professionals like you have managed to attract the best returns and will continue to do so.there is absolutely no argument in this regard.

    However for every wipro ,hul ,reliance etc there are hundreds of stocks which have gone nowhere.Spotting the next big stock early enough to make a killing is hardly possible for the retail investor.Building a equity portfolio requires serious effort ,time and knowledge.

    In case of real estate this is not the case.any land purchased in almost any area in 1980 or 1990 or 2000 would have given inflation beating returns at worst.this factor needs to be also considered.

    Index funds have hardly matched RE returns. So investing in a blend of mutual funds with good track through SIPs and RE plots for lumpsum investments (ideally full down payment without loan)maybe the next best thing to do if you don’t have the skill to invest in direct equity..comments welcome.

    P.S – when I mention RE investment,I mean purchasing land and not flats or houses.

  5. Hello Subra Sir,

    One quick clarifications, so Wipro is around 40 lakh rupees market capitalization in 1977, hence 2 lakh would have been 8100 cr. Today Wipro Maket Capitalization is around 145000 cr

    Last query, now if i invest in Wipro (market capitalization 145000 cr), TCS market capitalization 5,00,000 cr, in order to expect them to be multibaggers 10 years down the line, they have to be at 4,50,000 cr for wipro, 15,00,000 cr market capitalization for TCS.

    Will they really do reach this ? Does our IT services revenues grow like this ? Could you please clarify if my computation logic based on the market capitalization ?

    I am really thankfull if you can reply with your thoughts ?

    Thanks
    KP Rao

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