Tuesday, February 23, 2010

How to Create 'Real Wealth' in Stock Market ?

It is a usual slide in many investors presentation on Wealth Creation. For instance we start inquiring what would be the current value of Rs.10000 invested in 1981. After a couple of 'hints' we 'disclose' the current value is Rs.277 Crores (!!!) and the company is WIPRO. There would be a gasp in the crowd. Then we continue to give a few more examples: for instance Rs.10000 invested in 1979 in CIPLA is worth Rs.111.60 Crores and 100 shares of Cipla bought in 1979 has today multiplied into 36,00,000 (36 Lakh) shares of Cipla. This is like pulling Rabbit out of hat in a magic show. There would be unrest in the crowd once people see this.

One of the investor who attended to this presentation call me late by night (10.30PM) and asked if the Rs.111 Crore figure is a fact or a fiction. I assured it is a fact. He went on to say he is betting with his friend who strongly denied that Rs.10000 can never grow to such huge extent. The investor asked me to send the details by mail so that he can prove it and win the bet (ofcourse the sum is undisclosed !).

Below mentioned is the computation that we sent to the investor. We thought, you would also stand to benefit out of it. Choosing the stock with rich bonus history and staying invested can create such huge wealth.

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