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Unbelievable but True: The Power of Equity

Unbelievable but True: The Power of Equity


If I could traverse back in time zone like the actors of one of those typical sci-fi movies, (despite the fact being I wouldn’t have existed on planet Earth then) I would have made my mother buy 100 shares of Wipro for my future and made her sit over it for the next 35 years. Now you must be wondering why such a lame wish?

Well, to your utter disbelief, this time-travelling wish of mine would make me a billionaire today by all means. Yes, technically so to speak, if I would have invested Rs 10,000 to buy 100 shares of Wipro in its IPO in 1980, it would have fetched me 96,00,000 shares of Wipro or Rs 547.58 crores today (as on 3rd August, 2015) – this whopping figure excludes the additional dividends that I would have fetched from my investment.

And now you have every right to know, how this minuscule Rs 10,000 investment can turn into Rs 547.58 crores without doing anything.  Well, when you bought these shares in Wipro, you became a part owner in the company to the extent of your share capital. When the company kept growing year-on-year, it provided corporate benefits to its shareholders (or part-owners) by the way of bonus shares, stock-splits, etc.  These actions are apart from the dividends that the company kept on paying year on year to its shareholders out of its profits (over and above Rs 547.58 crores).

Yes, dear friends – this is called the Power of Equity. Call it a tradition or our inability to take risk – for generations we have been stashing all our savings into bank FD’s or gold. Historical performance has proven time and yet again that equities deliver highest returns in long-term over all other asset classes.  And there is indeed no better time to discuss this than now when the markets are zooming at their life-time highs.

Remember, for every multi-bagger story like Wipro, there are several companies in the hindsight that have deteriorated investors wealth and turned into dust. Hence, investing in equities alone isn’t enough, Investing in the right company at the right price is even more significant to create wealth.

And now a word of caution – if you are able to select the right company, keep your emotions at bay and do not get driven by daily market fluctuations because time is your best pal here.  The longer you stick to your investment, the richer you become.

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Happy Investing!

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