How to Generate Wealth by Investing in Equities over a Long Period of Time

Historically, investments in equities have generated wealth for the investor over a long period of time. It is generally perceived that small amounts of money are not worth investing. Small drops make an ocean similarly small amount of money invested with discipline creates a good amount of wealth. Also I have come across people who feel that wealth is only for super rich people. Anyone can build wealth with discipline and patience.

For this you need to buy good shares and forget them. If you continue to monitor the price on a daily basis you will not be able to hold on to the investments and this will result in your selling the shares by either booking the profits or losses. The trouble here is the moment the market falls or the price of the shares drop, the investor gets worried and forgets that he or she has invested in it for a longer term. A smart investor would ignore short term volatility in the market. You should remember that you are not buying equity shares but buying a business. Fluctuation in the market is part of the game. If the investor has bought the business after taking informed decision, he or she should not worry. If the markets crash, businesses are not closing down. They will continue to do their businesses and generate profits.

Here are few examples how investments in shares have created wealth during the last 30 years.

  1. Wipro – If you had invested Rs. 10,000 in 1980, your investments would be worth approximately Rs. 330 crores now.
  2. Infosys – If you had invested Rs. 10,000 in 1993, your investments would be worth approximately Rs. 3 crores now.
  3. Asian Paints – If you had invested Rs. 10,000 in 1983, your investments would be worth approximately Rs. 1.25 crores now.

This is only possible if the investor is still holding the shares.

Unfortunately, I find that many youngsters trade in the market and expect faster returns. They think trading is investment. This trading can be called speculation or gambling. There is another group of people who believe in timing the market. Again this is like speculating in the market. Remember time in the market is more important than timing the market.