12 March 2019 AnkitChadha

Equity Investments: Shortest Path to Wealth Creation


Let us try to answer everybody’s favourite question today-“How does one become extremely rich?” Now, if you have not inherited a large sum of money from your fathers/forefathers and if you want to become really wealthy on your own, then you can do one of the following 2 things:

  1. If you are a genius like Mark Zuckerberg or Bill Gates, then you can build and run your own business. If you can really do this well, then there is no doubt that you will become a legend-King of the World and you will become a billionaire
  2. If you are an ordinary person like me, then you can invest in great businesses which are built and run by other geniuses and still become very wealthy

So, the next question is, “How do you get an opportunity to invest in great businesses?” The answer is simple-Buy shares or part ownership of a strong franchise/company, which is run by a great management and has a very strong moat. One needs look at buying shares as an opportunity to invest your money, in order to become part owner of a business.  And if you can invest in the right businesses or great companies, then there is no limit to the amount of wealth that one can create.

Let us look at a couple of examples, which will make this clear for us. A company called Page Industries, also known as Jockey India, got listed in 2007 and was into the business of manufacturing and selling undergarments. Since they had a strong moat of a quality product which was priced reasonably, the business did very well. It did not have a lot of competition and was dealing with a product that had an unorganised market of much smaller players.

The price of 1 share of Page Industries was Rs 271 in the year 2007 and the same touched a price of Rs 34,651 in August 2018 i.e. 11 years later. The share was 127 bagger which means that the value of the share multiplied 127 times over a period of 11 years. So, if you had invested Rs 1Lakh in Page Industries in 2007 and had stayed invested till 2018, you would have received an amount of Rs 12.70 Crores—Enough to allow you to retire and live the rest of your life prosperously.

Similarly, stock prices of businesses like Maruti and Eicher Motors have gone up by 40 times and 50 times respectively in the past 15 years. Stock prices of Infosys, which was listed in 1994, have gone up by 6000 times in the past 25 years. If someone invested just Rs 10,000 in Infosys in 1994, he would have had a corpus of 6 Crores in the present day and age.

So the moral of the story is simple-

Put aside some money and buy some shares of a great business which has a strong moat, high quality management and great prospects of future growth. Then, just sit on your investment for a few years and let the magic work! And viola-you’ll become very rich without even having to work very hard for it!