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basant
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Quote basant Replybullet Topic: Magic of compounding -109 times in 10 years!
    Posted: 28/May/2007 at 12:32pm

What a rupee of investment can become at different CAGRs?

      Years 30% 35% 40% 45% 50% 55% 60%
1 1.30 1.35 1.40 1.45 1.50 1.55 1.60
2 1.69 1.82 1.96 2.10 2.25 2.40 2.56
3 2.20 2.46 2.74 3.05 3.38 3.72 4.10
4 2.86 3.32 3.84 4.42 5.06 5.77 6.55
5 3.71 4.48 5.38 6.41 7.59 8.95 10.49
6 4.83 6.05 7.53 9.29 11.39 13.87 16.78
7 6.27 8.17 10.54 13.48 17.09 21.49 26.84
8 8.16 11.03 14.76 19.54 25.63 33.32 42.95
9 10.60 14.89 20.66 28.33 38.44 51.64 68.72
10 13.79 20.11 28.93 41.08 57.67 80.04 109.95
 
I carry a copy this paper in my wallat and would suggest all Teddies to move to the bottom of the right hand corner in this chart.


Edited by basant - 28/May/2007 at 11:07pm
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investor
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Quote investor Replybullet Posted: 28/May/2007 at 12:40pm

Illustrates the "POWER OF COMPOUNDING" in very simple manner - Good post Basantji!


Originally posted by basant

What a rupee of investment can become at different CAGRs?

      Years 30% 35% 40% 45% 50% 55% 60%
1 1.30 1.35 1.40 1.45 1.50 1.55 1.60
2 1.69 1.82 1.96 2.10 2.25 2.40 2.56
3 2.20 2.46 2.74 3.05 3.38 3.72 4.10
4 2.86 3.32 3.84 4.42 5.06 5.77 6.55
5 3.71 4.48 5.38 6.41 7.59 8.95 10.49
6 4.83 6.05 7.53 9.29 11.39 13.87 16.78
7 6.27 8.17 10.54 13.48 17.09 21.49 26.84
8 8.16 11.03 14.76 19.54 25.63 33.32 42.95
9 10.60 14.89 20.66 28.33 38.44 51.64 68.72
10 13.79 20.11 28.93 41.08 57.67 80.04 109.95
 
I carry a copy this paper in my wallat and would suggest all Teddies to move to the bottom of the right hand corner in this chart.
The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!
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Quote omshivaya Replybullet Posted: 28/May/2007 at 6:54pm
Sir, very nice post. But as you yourself have said many a times, that at one go you can't see beyond 3 years. So, it is difficult for me to see a 60% CAGR for 10 years. Even if someone is a patient investor and plans to hold onto a group of good stocks for 10 years, can he in your opinion see beyond 3 years as you say?
 
He has to review on TED, after every 1 year or maybe 3 years how's the portfolio doing?
The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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Quote tigershark Replybullet Posted: 28/May/2007 at 7:46pm
it is easy for a rupee to double , its also easy for2 rupees to become 100 but as the capital base increases then maintaining that 60% growth rate is a tough call although not impossible i suppose all investors will face this dilema so no wonder buffet has kept the compounding at 15-20%
understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things
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Quote kulman Replybullet Posted: 28/May/2007 at 8:37pm
What Doctor Saab has mentioned  is a valid point. The reality is that majority of the people fail even to achieve 15~20% CAGR consistently over longer periods. The reasons are mainly: Fear & Greed!
Life can only be understood backwards—but it must be lived forwards
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basant
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Quote basant Replybullet Posted: 28/May/2007 at 9:00pm
Now let us take it this way. If someone told an investor that DIsh Tv which is currently at Rs 130 should be close to Rs 210 in about one year 80% of people would say tell us something that can double in 3-6 months? That is tragic because an ignorant is trying to hit six sixes in an over when he has to get just 8 in an over.
 
Buffet achieved his returns in an economy that did not have sudden gush of air like Software, Telecom,Retail, Property, Media etc but here we are sitting at the cusp of change. Maybe in 3-4 years the horses would change but the endevour should be to choose faster horses rather then older ones.
 
If at all anyone can do that 60% CAGR it would come from a buy and hold strategy and by avoiding big mistakes.- I am pretty sure about that.The only mistake he can do is to lose the opportunity cost
 
I am be sounding confident but that confidence is not based upon hollow premise. We can generate that kind of return the idea is to look at companies which we can sit down with for 2-3 years. Actually it is not that simple but also not impossible.
 
Now for a 25% - 30% HDFC Bank is a no brainer. the problem starts when we start hitting that 50%-60% level on the ambition scale.
 
If we start taking that 10 year call then things would go wrong what we need to do is take small 2-3 year calls and then periodically monitor the situation.
 
A team that chases 350 to win in 50 overs tries to get 100 in the first 15 overs with not more then two wickets down. The wickets are our stocks/mistakes. Remember Buffet's call for a 20 hole punch card and no man should buy a 21st company in his entire lifetime. That is the need of the hour.
 
Personally I am a dreamer and I dream about my company's EPS 4-5 years hence even while I am walking on the road. I use my mobile as a calculator and every time I have nothing to do I am extrapolating the EPS....
 
 
 
 
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 28/May/2007 at 9:12pm
Sir, just a personal question.......am I not a misfit person to be on TED???? because I sometimes view myself as being an eye-sore in your eyes...
 
Regards,
 
Vivek
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Quote kulman Replybullet Posted: 28/May/2007 at 9:27pm
You have said it very very nicely.
 
But as we know, fear & greed ...i.e. emotional aspects are the main things apart from backing good horses. Those big mistakes including loss of opportunity is what drags the returns.
 
 


Edited by kulman - 28/May/2007 at 9:32pm
Life can only be understood backwards—but it must be lived forwards
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