10,000 invested in Wipro became 500 crores free

I am sure you must have seen the famous example of how Rs 10,000 invested in WIPRO became Rs 500 crore in 2019. This is a huge asset. But today I want to decode this story and see what are some of the issues and problems. I have made a video on this topic, see below

First, note that it is not just Wipro that has created huge wealth for its investors. There are many more examples, such as

• Cipla: In 1979 an investment of Rs 10,000 would yield 95 crores
• Infosys: An investment of Rs 10,000 in 1992 will yield Rs 1.5 crore
• Ranbaxy: An investment of Rs 10,000 in 1980 would yield Rs 19 crore
• HDFC bank: An investment of Rs 1 lakh in 1995 will yield Rs 8 crore

While there are some examples of people who were able to hold stocks for 35-40 years and created huge wealth for themselves, one question we would ask ourselves is – Is it even remotely possible for a common man to do this?

2 problem would be invested in Wipro example

Problem #1: Survival Bias

Wipro’s example is a classic example of survival bias, where we choose the example that has already worked and lived for 40 years. It’s easy to look back and simply say if you wait for 40 years 10,000 becomes 500 crore?

It is nothing more than a data point. You are just looking at statistics.

For every example of invested in Wipro, Infosys and Reliance – there is one example of Reliance Capital, Unitech and Cox & Kings which have destroyed all assets over the years.

How will you choose invested in Wipro in 1980 with so much confidence for the next 40 years? it is almost impossible.

Problem #2: How have you been handling your feelings all these years?

“If you invest for 40 years” that’s it.

• Who invests for 40 years?
• Who buys and holds for 40 years?

I’ll tell you, it’s mostly people who are dead or someone who forgot about the investments they actually made.

And then there are the promoters of the company who hold on for so long. And lastly, there are very few people who would have done it successfully whose example we see on the net. But this is never going to happen to most people because it is almost impossible to control your emotions when you see a stock going up or down so much.

• When you invest Rs 10,000 and it becomes Rs 1 lakh in 1 year – will you not sell?
• If not, what if that Rs 1 lakh becomes Rs 5 lakh in the next 2 years? – Won’t you sell now?
• If not, what if that 5 lakh now becomes 1 lakh and the value drops by 80%? – Will you still have “faith”?
• What if that Rs 1 lakh comes back to Rs 5 lakh? now?

I think you get my point!

Only robots and machines can remain silent and not react. We are human and we do.

Here people sell when prices go up 10% and we are talking about holding a stock for 40 years?

Note that I’m not saying that there are people who don’t hold a stock for 20-30 years, but playing it isn’t as easy as it makes it look. ( invested in Wipro )

If you had bought Wipro in 2000, you would get your capital back now (adjusted for dividends). 0 return of 20 years. Meanwhile the company’s revenue increased by 26x and PAT by 40x. This is what happens when you buy Growth at any cost. pic.twitter.com/AByCccmd9V

— Equity Markets (@EquityMarkets_) December 30, 2020

Enjoy the journey of Equity Bull Run and keep using the money

Note that shopping for a 40 year old isn’t always practical. Even if you have good stocks and patience, it is wise to take profits from time to time and use it for your life goals. Use it to go on vacation, buy a house, travel and buy stuff. 500 crores Rs. There’s no point in dying with it unless you really want to.( invested in Wipro )

Another point is to have a well diversified managed portfolio where you are betting on many stocks and not focusing on a few. So have realistic expectations from stock investing and take these examples with a pinch of salt.

Use these examples just to reassure yourself that equities have enormous wealth creation potential and are an important part of your portfolio.

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