How? Using power of compounding. This is again a cliche...Everyone knows the power of compounding and how things can grow in time. The point I am going to make here is not the power of compounding but how easy it is to utilize this power without any effort when u invest in long term stocks.
Initially I used to think whats the use of dividend when the stock prices appreciation is enough to make money and the dividend payout is paltry.
Now look at this chart.
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | ||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | 953674.3 | 1192093 | 1490116 | 1862645 | 2328306 |
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | 953674.3 | 1192093 | 1490116 | 1862645 | |
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | 953674.3 | 1192093 | 1490116 | ||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | 953674.3 | 1192093 | |||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | 953674.3 | ||||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | 762939.5 | |||||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | 610351.6 | ||||||
| 200000 | 250000 | 312500 | 390625 | 488281.3 | |||||||
| 200000 | 250000 | 312500 | 390625 | ||||||||
| 200000 | 250000 | 312500 | |||||||||
| 200000 | 250000 | ||||||||||
| Total | 10641532 |
This chart shows what will be the value of your investment if you keep investing 2 lac per year with expected return of 25%.
You can increase the amount or return to achieve the goal faster.
Now to get 2 lac investible amount is not difficult. What is difficult to continuously getting high returns year on year.
Here comes the fun part... to get this kind of return you don't have to keep scratching ur head, your long term investment will come to rescue since they will keep giving u good returns.
Now googly. We have so many stocks & mutual funds which were invested long time back and now giving 100-400% dividend.
Lets say you invested in a stock for 10 rupee. after few years it has become 100 rupee and has given dividend of 50% this year.
Fow someone who is investing now will think 50% dividend is 5 rupees on 100 rupee .very less.
But someone who invested long time back is getting 50% return on his investment every year. Appriciation in the stock value is just an added advantage you can say.
Quite amazing right? according to chart we just need 25% to become crorepati..Here I have shown how your goal will be achieved automatically literally "tension free".
So now Imagine keeping your money invested for 15-20 or more years....and getting 25-50-100% percent returns on your original investment. Add that to power of compounding and you can see how easy it is to make huge many.
paisa paise ko keechega...money will work for money.......what you will do then?????
You will enjoy the beautiful things in this world god has created for you :-)
KEEP THE FAITH.
2 comments:
even now I dont place too much importance on the dividend. Dividend are provided on the face value which might be very small even if you are the first one to bought the share. Secondly, if you get the dividend , the chances that you will re-invest that paltry sum is minimal. What will be more beneficial if the company, instead of providing dividend, can use it to make it's company more profitable and thus leading to a higher appreciation of its shares.
Also, higher dividend is considered as negative since it symbolises that company doesn't have things to invest their money in and are given when the company is not able to pay the stock holders by market, such as the case with the oil companies now.
I agree the dividend are too small because they are on face value.
As I mentioned if you invest for long term after few years they don't remain paltry, see most of the mutual funds you buy now in young age will be growth based rather than dividend and it will be reinvested automatically without hassle.
higher divident is considered negative but not always and this is not generic.
Every company grows and after it has become behemoth it cannot grow at the same rate which it has grown in the past because of higher base effect.
so if earlier company was growing at 50% CAGR now it can clock only 5-10% at max.
This doesn't mean that company is bad. Company has reached its peak and is having good profits so declaring dividend to its share holder.
In the end you invest in a company and you want a share of profit.
You cannot keep investing the excess profits you are generating for growth.
This is through my extensive reading I am telling you.
Nonetheless I appreciate your comments and will give it a second thought :-)
Post a Comment