Many of us find religious sermons soothing to the mind and soul. Every religion preaches us to do good deeds in our life so that we may reach ‘heaven.’ One literally talks about the importance of ‘good thoughts, good words and good deeds.’
Heaven sounds so attainable when I am attending these sessions. But once the hour-long or so session is over, I get back to my usual, human self.
Presumably, the first demonstration of this ‘normal’ human form may appear as I try to push someone in the queue so I may be the one who gets out of the auditorium before anyone else does. And then may follow, something like a rude commentary on someone trying to overtake my car or my desire to take advantage of that unmanned traffic signal, as I rush home to get prepared for my next day’s early morning meeting.
These are just a few examples that our lives are filled with- numerous not-so-desirable actions that we try to avoid when we are in the sermon halls. Why is this so? Why do we succumb to human fallacies? We all know we need to do good deeds so that we can reach heaven- well, at least what we believe is heaven.
Simple to understand? Yes. Easy to execute? Maybe not.
This is because our desire for instant gratification dominates us. It is even more critical when it involves ‘intangible’ dreams.
So, it’s challenging to maintain that sanity of mind every moment in the pursuit of heaven. Also, no one has been to heaven and back, to narrate the real-time experience. As a result, the sermons we listen so attentively seldom translate into us undertaking real-life actions -especially a week or two after the sermon.
What does all this have to do with investing, though?
For me, a parallel to these sermons is when I attend what one could think of as ‘financial sermons’- workshops or educational sessions on investing concepts. When I attend these, I think of myself as an eager, curious investor. The words of wisdom sound so doable and goals so achievable. However, the impact lasts for a week or so, and after that, I get dominated by my habituated human follies.
- Chasing the next big story, trying to make some quick bucks
- Overconfidence in my pseudo-ability to time the market
- Covetously comparing my investment returns with friends, relatives, colleagues. Sometimes even strangers.
- Going back to allocating an enormous pie of my savings into guaranteed and physical assets.
The words of wisdom during the investor awareness sessions on inflation, embracing the right asset mix for building a hefty retirement corpus which will enable me to maintain a great post-retirement lifestyle, starting a SIP as early as possible and what not, all sound good.
But somehow, I continue to struggle to contain my desire to get super-rich, super fast.
This desire to get super-rich super fast is arguably the single biggest reason why many people do decently well in life but still don’t end up creating a fortune. The one possible explanation for this could be the will needed to remain on the ‘path to eternity’, which requires discipline to the level of extremity, which seems beyond most of us.
In addition, the holy grail at the other end of the terminal is fine as it promises to maintain my current lifestyle, but what’s the big deal? Even today, I am not really financially satisfied with what I have, and hence, I keep seeking quick but guaranteed returns. And, most of the time, I get waylaid into buying products that I should not have bought otherwise.
So, there is a massive mismatch between:
What I need to do to achieve financial wellness
What I prefer and put the effort to do
What I will get as a reward – that too after decades
However, there are some remarkable success stories in the history of mankind, when some ordinary human beings demonstrated extraordinary skills to stick to discipline and achieved incredible feats in return.
A good example could be the Olympians who toiled for years to finally make it just to the stadium. But that’s less than 0.001% of the sportspeople in a particular generation. The other 99.999% either got distracted from their dreams somewhere at the district, state, or national level. Those who eventually made it to the Olympic podium didn’t try an entirely different strategy. But yes, whatever they did, they continued doing it day in and day out,, for years. Not to forget, the greatness of the promised land at the other end kept them engrossed and motivated during the journey.
For this strategy to succeed among even more participants, we need to understand three simple steps.
- Firstly, it should not demand something crazy which only a few human beings will be able to repeat for decades.
- Secondly, embracing that it won’t happen in months or years but will indeed take decades.
- Finally, keeping an eye on the glory to be achieved once the strategy succeeds.
Incorporating these principles in personal finance, one can infer that even a habit of small investment but one that is repeated for decades can do wonders.
Just mentioning it as a wonder doesn’t excite me anymore as I have heard that term numerous times in investor awareness sessions. I need to visualise it to make it doable.
Does a Rs 100 crore for your Child excite you?
For me, yes. So this is what I visualize- my child, wealthier than my dreams.
I know it won’t be easy for me to touch the 100-crore mark in my lifetime, even if I commit a reasonably hefty amount as monthly SIPs in mutual funds. For SIPs to help you create wealth, time is the most significant factor, and unfortunately, I have already spent a considerable part of my life not being disciplined, especially when it comes to financial habits. But if my child can own a Rs 100 crore in his or her lifetime, and can achieve the feat of becoming a Billionaire, isn’t that a dream worthy enough to chase?
I do accept it will require me to commit a large sum of money every month, which may lead to cutting down on my current lifestyle. Does it sound like a way to heaven without committing any sin- and hence, unrealistic?
Maybe not. What if I say a Rs 3000 monthly SIP at a 12% compounding could be worth more than Rs 100 crore by the time my child is 68 Years.
“68 Years! That is crazy!”
Well yes, 68 Years. So what? Do I have a more accessible and quicker, guaranteed alternative for me to give my child Rs 100 crore by that time? Not really. Mark my words; I am actually talking about an easier and legitimate alternative- and I’ve done the math on this.
For me, the Rs 100 crore feat looks super exciting even at 68 years, and that too with a mere SIP of Rs 3000 per month. This magical number is worth a dream, and the way to reach heaven can’t be simpler. It doesn't even demand the toughest of financial discipline. It calls for discipline only to the extent of continuing the SIP till the age of 68 Years. So once my child attains the age of 18 Years, and he or she is no longer a minor, and later once he or she starts earning, the only piece of advice on personal finance I may give him or her is to continue this SIP.
However, this journey may not be as smooth as it sounds. There may be years of extremely low or negative returns. Similarly, there is no guarantee that markets will generate a 12% CAGR for the next 6-7 decades. However, in the last 42 years, Indian markets have generated a CAGR of more than 15%. So I’m willing to bet and hope here.
Now everything in life has a price, and the price to ‘earn’ the return you want is the volatility in the asset class, and more so, the conviction and this minor discipline that goes along. As human beings, we unconsciously look for shortcuts in whatever we do, so it can’t be any different here.
By the way, a shorter route in terms of the time needed to reach Rs 100 crore is to add a SIP Top Up of a mere Rs 500 every year. This one action will reduce the timeline by 7 years.
Now, what's a SIP top-up?
Simple really. I start with Rs 3,000 per month and choose the option to increase my SIP amount automatically by Rs 500 every year. This can enable my child to reach the ‘podium’ in 61 years instead of 68 years. Moreover, a mere Rs 500 increase as Top-Up every year may not burn a deep hole in my pocket either.
Similarly, a monthly SIP of Rs 10,000 at 12% CAGR could be worth more than Rs 100 crore by the time my child turns 58. This feat can also be achieved before his or her 49th birthday with an annual SIP Top up of 10% added to this SIP. Simple mathematics.
If this route to Rs 100 crore with the smallest effort excites you, do consult an expert financial advisor to understand this power of compounding and long term investing further. Besides, your advisor can also help you check how sooner or later, the Rs 100 crore may be achieved if there is a change in the SIP amount.
For sceptics, who may still doubt the worth of Rs 100 crore after 49, 58, 61, or 68 years, and hence on the level of excitement, just to assure- it will still be hefty. Don’t overthink and continue to do what you can - what you can control is the input, not the output.
Invoking something I just remembered from the last religious sermon I attended- “कर्म करो, फल की चिंता मत करो |”
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