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.
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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