A couple of days ago I did a post saying ‘markets are up buy 40%’ – to which a couple of friends called up and said “Hey thanks to you my portfolio went up by 55%’. Thanks guys. The minute you told me that I was reminded of the donkey story.

http://www.subramoney.com/2009/02/relationship-manager-fund-manager-or-magician/

This is not about how they got a 60% return on their portfolios, it is about what it has done for their lives. Let us take the case of this person – lets name him RS.

He had about Rs. 2.5 crs. in equity funds / direct equity in December 2013. In the month of Feb 2015 /March 2015 he has about Rs. 4 crores. This is about 60% – but over a slightly longer period than one year.

What does 60% do to his portfolio? Well the question to ask is what does Rs. 1 crore addition do to his portfolio.

Assuming that his monthly expenses are about Rs. 40,000 (say Rs. 500,000 pa) – he can live another 20 years (I am assuming real returns, so that adjusts for inflation).

It means that at his age of 63 he need not worry AT ALL ABOUT needing to go back to the job market to make a living.

It means he can fool around a little with his asset allocation. He had about Rs. 2.5 crores in equities and about Rs. 1 crore in debt products. He also has a LIC annuity paying him about Rs. 28000 per month. Now with Rs. 4 crores in equities, he can afford to pull out say Rs. 1 crore from equities and put it into a Balanced fund / annuity say in a 50:50 split.

In case his daughter has a baby, he and his wife can afford to fly to Australia without expecting his daughter to pay for the ticket and the visa!! (and insurance too!!).

He can afford to travel by a comfortable mode of transport – instead of trying to travel by the cheapest mode.

He can afford at least one vacation every year.

I had held him back (still holding him back) from committing to buy a Retirement home for about Rs. 80 lakhs in Coimbatore. He can now argue that the asset is coming from the gains in the market, so he is justified …

He is of course thrilled with what has happened, but did not spend Rs. 10L to celebrate this super profits!! Just a nice dinner for him and his wife. (sensible reaction to market super profits is a very very important step in wealth creation and keeping).

He bought something really expensive (by his standards) for his son in law – a 600mm Canon lens for his DSLR camera. Google the price and be shocked please. Of course his son in law is a very good wildlife photographer, but I had the pleasure of seeing his face when he saw it. I am sure this was a brilliant gift, and I can take 99% credit for pushing the purchase. My friend says he owes me a lifetime of gratitude for that expression. Sorry, but I agree!!!!

So see the impact of a 60% return on YOUR portfolio. Kick yourself if you had too little money in equities. Make amends NOW. Over the next 5 years there will be one more year when the market gives you a 60% jump start to your portfolio. Be ready to receive it.

If you have Rs. 100,000 in equities it will mean Rs. 60,000. If you have Rs. 10 crores in equities it will mean Rs. 6,00,000, 00.

Make your choice where in the x axis you want to be. Near 100k or near 10 crores. That is YOUR call.

 

 

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  1. Subra, you really can sell equities to a layman-Not the fraudulent way but by commonsense. that’s great!

  2. Leave about 1 percentage of population. You certainly convince 99% (if not 100) of the people visit this blog. I myself shared your blog to many of my friends and they are doing SIP.

  3. question:What a 60% equity return in one year does to your life?

    answer: makes you more cocky, supremely albeit falsely confident about your stock picking / value investing philosophies , lulles you into a false security of this lasting forever!

  4. @ moronbuffett : This is exactly what Donkey’s story describes, hope you read it πŸ™‚

    @ Subra : You are one of the 2 people, searched around by my family members and you exactly know why πŸ™‚ And I bet you know who that other person is πŸ˜›

    Thanx for bringing in the discipline in me…

  5. The scary part is what to do now… pull out (some)/ stay put…every day I convince myself to stay put and every afternoon I shake my head in disbelief…

  6. @Jitu : thanks. got it.

    quote:If you have Rs. 100,000 in equities it will mean Rs. 60,000. If you have Rs. 10 crores in equities it will mean Rs. 6,00,000, 00.

    reminds me of a famous tamil comedy scene where mill owner says if you grind 1000 bags of paddy, you will get 500 bags of rice, 10 bags of paddy 5 bags of rice.
    customer will finally say he is yet to purchase land, then cultivate and harvest rice but wanted to check the price for milling!

  7. @LuckyOye

    I wonder what a 40% DECLINE in you equity portfolio would mean… –

    Dan Ariely probably has a better name for the big number bias + loss aversion

    the same mind that jumped up and down on 60% increase on a will be down in the dumps when there is a 60% decline

    the pain experienced on loss of 60% is much much more compared to the joys experienced on gain of 60%

    so If you have Rs. 100,000 in equities it will mean Rs. 60,000. If you have Rs. 10 crores in equities it will mean Rs. 6,00,000, 00. the hit will be even harder.

  8. Subra sir:

    You can call it super optimism or just timing the market but i think the next 60% year will happen soon. 2017 or 2018 is my best estimate. There are a lot of reasons for it.

    Good for those who have 1L or 1cr or 10cr in the market, i pity those who still think Equity is “pure” gambling and property prices never fall!! They will be the ones tearing their clothes apart for missing this great opportunity!

  9. I know a case where a person with 1 Cr in equity and was about to retire got heart attack after his portfolio wiped out by 60%. Unfortunately he died. No one ever discusses worst cases. The whole world wants to discuss success stories (high returns, holidays, hospitals, gadgets and abroad travel).

  10. Yes Krish. I am so so so so happy I grew up in an EQUITY positive atmosphere and not among those people who died because their portfolio got wiped out.

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