In the 1960s if you wanted to buy a house in Mumbai, you did not go to a builder, you went to 7 or 8 friends and said ‘let us form a co-operative society. Then you bought land, and then went to a builder and asked him to build a house for all of you. Funding was by Maharashtra Co-operative Housing Society..and the society paid a small EMI. Each individual was told how much he had to pay ….

Similarly you just waited for the company to give you a car. You could not really afford to make a full down payment.

Then came in Citibank, Standard Chartered Bank, American Express who gave us credit cards, car loans, and hey loans which could be used to buy homes. Of course by then Hdfc had come and had started disbursing home loans. Then the Indian banks like Icici and Sbi stepped in and gave huge home loans.

The Indian banks threw out the foreign banks in credit cards, car loans and of course home loans.

Wait a minute. Hdfc Ltd, Hdfc Bank, and Icici bank are Indian companies right? well, well they are registered in India and about 70% is owned by the same guys who owned Citi, Amex, Hsbc….LOL…So nothing really changed.

Now look at pharma. The Indian pharma companies are Dabur, Cipla, Dr. Reddys, Torrent…..now go and see who owns these companies. You might be surprised.

Is this a flash or a mega trend? 

The Indian FMCG companies are Dabur, Godrej, Emami, …and of course Patanjali. They are beating the hell out of the ‘Foreign’ companies like HuL, etc. Waiting for a big Indian company in the sanitary napkin space, …these companies are likely to make a lot of money. We have already started getting reports of how Patanjali is pricing its soap at about half or less than that vis a vis HUL and toothpaste cheaper than Colgate.

Is it a fad or a mega trend? 

Will these upstarts hurt the biggies? will solar power hurt NTPC and Tata Power?

Is it a fad or a mega trend? 

One of the constants in investing is the retail investor behaves like the police in the Bollywood films. Reaches only after the event is over. It makes little sense to reach a party late. The drinks should have been announced – you cannot go when the guests are having their 4th tequila. Yes of course you can go there, but if it is a small party, you may have to just do the cleaning up by the puking of the earlier guests.

Why does this happen? Simply because we do not notice the changes that happen in front of our eyes. It took Bajaj Auto a long time to start making motorcycles. Similarly the small investor does not notice the trend. Worse, he has no clue as to how to react. Should you buy Sun Pharma at 400 or wait till it reaches Rs. 1200? what if they are hit by an US letter? Not easy to answer…

So he has to do a SIP – remember time weighted, rupee weighted returns are the best..go and do your SIP. Remember SIP does not make you rich 🙂 but you can meet all your goals…

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  1. He he ..
    The last line is exactly opposite of what subramoney stands for ??..
    Making people richer..
    Brilliant write up..

  2. Subra sir,
    Great post as always.

    But i dont get why SIP cant make one rich? Or is it implied sarcasm?

    SIPs can not make one rich over night,
    but if one does his SIPs diligently for say 25 years and gets say 12% cagr.
    If He/She monitors them well, learns and makes changes when needed, then why not?

    Why would they not make one rich? Is there any specific reason for that?

  3. Getting rich / wealthy is a multi decade / multi generation kind of a thing. Assuming that a guy starts investing at the age of 34 (get realistic) and saves over 25 years after paying for his parents expenses, family expenses, etc. the amount that he can invest is really not much..and not too much is getting compounded…

  4. sir i really dont know why people are doing jabam of sip sip and making rich

    it is simply RD for mutual fund or shares

    i come from generation where we did RD for 2 3 yrs college admission delivery etc

    how much monthly you put and how many months finally tell you what you going to get because rate is same anyway.

  5. I like this sentence; it’s really funny – ‘retail investor behaves like the police in the Bollywood films. Reaches only after the event is over.’

    Sir u hv gud sense of humour 🙂

  6. lakshminarasimman

    do u invest in equities? direct of mutual funds? I do. I prefer time weighted returns to rupee weighted returns..SIP works, it is a brilliant concept, and more nd more people should use it to increase their net worth and investing discipline..

  7. @Subra sir

    Thank you for explaining sir.
    I get what you are trying to say, that is mostly the case with people doing SIPs.

    That gets me to ask a clearer question.

    What i mean is, if given all the expenses if one is still making a fairly large surplus and does not have the time/inclination to understand or study stocks, then if he chooses to invest that surplus through the SIP route and let the fund managers decide where to put it?

    Is it still not a tool for wealth generation? Vis-a-vis, is Direct equity investing absolutely necessary to get rich through the market?

    Alternately, does direct equity investing (Basket of stocks) returns almost certainly beat SIP returns over a 25 year period?
    is one better than the other?

    Thanks

  8. sir yes i invest in mutual fund only not direct shares
    my point is it is like another monthly rd for shares. just like rd how much i put per month and how long i put will impact my final result
    we have to put as much as possible as long as possible right?

  9. Subra sir, perfect ending as always. Taking liberty to add one more data point to your data set. Have been investing through SIPs for last 10 years now. Started with a couple of SIPs of Rs. 1500 each, to a few of Rs. 5000 today, I have earned on an average 13% return YOY. Includes the downturn after 2008 as well as the bad bad last year.

  10. Arpit 4k, 10k, 35k….are all nice figures..13% is a good number to target. It will help you achieve your goals for sure..but it is not going to make you amazingly rich for sure..but yes it is better than investing in ppf and earning 8%.

    Now see how much it would have become in PPF..the problem is people not being loyal to the asset allocation as well as to the regularity

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