In the year 2000, the Royal Enfield Bullet cost approximately Rs 55,000.
If you were one of those who bought the bike, am sure you enjoyed your ride. Not sure what the current asset value of that bike will be today, but considering it’s a bullet it’s safe to say that it has probably retained it’s value.
However, if you had bought shares of Eicher Limited (the company that makes the Bullet) instead of the bike, you would have received about 2500 shares. The price of the stock at that time was roughly about Rs 22.50.
And if you had continued to hold it, the value of your shares would have been an eye popping Rs 4 crores. (Yes, the current stock price of Eicher Motors is around Rs 16,000 per share)
In 2000, Siddhartha Lal took over as CEO and scripted a fantastic turnaround story at Eicher Motors, which is reflected in it’s stock price today.
So why are we talking about this ? Here are a couple of reasons:
- Identifying Winners: It’s very difficult for the average investor to identify such winning stocks as most of them are outliers
- Staying Invested: Secondly, most retail investors would have found it very difficult to stay invested and sold out long ago. E.g. the moment the stock touched Rs 2-300, they would have thought, “Wow, my stock price has increased by 10 times my investment. How much more can it rise ? Let me sell before it falls“
So what can you do to grow your wealth ?
Since most of us cannot time the market, what we can do is give time to the market to deliver.
The stock market index (Sensex) has returned an average of 17% annualized returns over the years. However, as you can see from the chart below, it has had it’s share of volatility.
One way of consistently growing your wealth is to invest a small amount of money regularly via a Systematic Investment Plan in Equities and watch your money grow.
E.g. If you had invested Rs 2000 per month in HDFC Tax Saver Fund in 1996, your total savings of Rs 4.5 lakhs would have grown to Rs 1 crore 17 lakhs.