The third letter of Roman alphabet ‘C’ rules India. Before you start thinking something else, let me tell you that my statement is an apolitical one. The three synonyms of C which rules India are 11 cricketers, few thousand Civil Servants and an unknown number of crorerpatis.
Out of 1.2 billion populations to be selected to be a cricketer is more than luck apart from sweat and hard-work. Becoming a civil servant and serving like a faithful servant and remaining civil is another story.
Now the last C which represent Crorerpatis is a word which I first heard of in the Eighties. Dhanlaxmi Dewali Bumper, first prize Rupees 1 crore. Of course, then came the Kaun Benega Crorerepati? So our obsession with three “C” remains decade after decade.
My friend Abraham who’s a school teacher came to visit me one morning.
“You know to be born poor is not your fault, but to die poor is........sigh!!” said Abraham.
I don’t know what exactly was in his mind that day. He looked grim, otherwise a jolly fellow.
We all suffer from some sort of insecurity about our future. I believe a moderate level of insecurity is good as it keeps us on our toes. But above all financial insecurities is a plague which affect us all, rich or poor. This is because we don’t have a map with us representing the different financial destinations which we may like to embark on. Not understanding where you belong in your personnel financial health is the biggest uncertainty.
As it turns out, Abraham was worried about his retirement. Although he’s been earning for last ten years and there is another 25 years to go before his service ends, he’s anxious about his future.
Why I told you the story of Abraham has a significance in relation to the third C. We all need a road map if we want to reach a certain place or goal, lets take Shangrila as our destination, with a proper map we will know how to plan for the journey and also know exactly how long it will take to reach there. Here the Shangrila is to become wealthy or rich to be precise and the Map is understanding certain mathematical numbers. Lets say Abraham wants to became a crorepati by the time he retires and he expect a decent long term return of 12% then he needs to invest monthly Rs. 5,322/- .Yes nothing wrong in it he just needs to invest a modest amount of Rs. 5322 for the next 25 years.
Let me shock you more: as Abraham’s age is 35years he’s rather late. If he’d started his project of becoming crorepati ten years earlier then his monthly contribution would have been Rs. 1555 only with an expected return of 12%. By this time you must have gathered your calculator and started doing your own calculations and found out that his real contribution is merely 1555X12X35= 6,53,100 then where does this rest of 93 lakh come from??
It comes from a forth C which is known as Compounding. The magic of compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Suppose you invest Rs. 10,000 into a particular business. The first year, it gives a return of 20%. Your investment is now worth Rs. 12,000. Again, 2nd year, the business generates another 20%. Therefore, your Rs. 12,000 grows to Rs. 14,400. Rather than your value appreciating an additional Rs. 2,000 (20%) like they did in the first year, they appreciate an additional Rs.400 because the Rs. 2,000 you gained in the first year grew by 20% too. If you extrapolate to the subsequent years, the numbers can start to get very big as your previous earnings start to provide returns.
So this is the fourth C which India needs to discover. Let me say that every one of us can become a crorepati by the time we retire. Historically Indian Stock Market (Sensex) has generated a return of 18.6% per annum on an average. So in theory if we invest in it and it continue to give the same return for next 30 years and a boy or a girl starts contributing a monthly amount of Rs. 424 every month from his 18th Birthday and continue to do so till his 50th Birthday, viola!!!! On his 50th Birthday he’ll be a crorepati. For what, less then Rs. 500 a month????
So next time some friends or colleagues or cousins comes to you with a super successful intelligent scheme of making your money double in 6 month, beware of it. It’s been too long our simple and honest people has been taken for a ride by some con man with their dubious tricks. Learn to say: No thank you! for that you know for sure you will become a Crorepati, slowly but surely. Remember the tortoise always wins, unlike the rabbit.
Abraham slept in peace that night! For he got his road map that night, the map with directions of his financial future. Thy shall not die poor. None should die poor.
It’s time we discover the power of the fourth “C” which is Compounding.
Tips:-
• Start early!
• It is not how much, but how long you remain invested!
• Remain disciplined, contribute regularly.
• Avoid premature withdrawal.
• Remember your Goal is to be a Crorepati.
