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The power of long term compounding

Discussion in 'Fundamental Analysis' started by chaitanya_mella, Sep 18, 2019.

  1. chaitanya_mella

    chaitanya_mella Contributor

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    Recently there was a thread on twitter which said ITC share price was back to exactly where it was 5 years ago. Same was the case with few other companies too. This got me thinking. I did a small exercise and added few companies to a test portfolio in Valueresearch to check if it was even worth investing in them. However, the 5 year timeline was depressing to look at except for few companies. So I decided to go back by another 5 years.

    I added roughly a 1 lakh worth of shares with purchase price as on 17th September 2019. 15 companies in total. Some I own right now and some I track. The results were shocking to say the least. Even with companies that performed horribly over the last one-two years the CAGR is over 25% for a decade. That's an excellent return. I have only taken well known companies to keep the illustration simple. Thought it may seem this is all in the hindsight, it will help us understand that long term investment works best. So keep the faith, research well, and stay the course. That's what I intend to do.

    Dividends, splits, and bonuses have been accounted for. snap 1.png snap 2.png
     
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  2. shabbir

    shabbir Administrator Staff Member

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    This is awesome share @chaitanya_mella

    This will help many to get to understand the power of long-term investing and showing the patience. Yes one may have some looser in the list but when you have done the due diligence, it is more likely to have winners than loser in a decade long worth of investing.

    I will also like to add like it it kinda tough to keep holding good companies for a very long time. I have shared it here ( https://shabbir.in/tough-hold-profits/ ) and I will re-iterate with one more example.

    Right now there are a lot of news about Pidilite and how it is overvalued. There are fund houses sharing the target in range of Rs 1100 where as stock was ruling around Rs. 1350. Quite tempting to sell but my view is, will it not rise again past 1300? And if I am convinced it will for sure in the next decade, let me just keep holding it.

    You have to have such conviction and patience. It is tough but investing books help you get that kinda patience.
     
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  3. chaitanya_mella

    chaitanya_mella Contributor

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    Thanks Shabbir...

    I would like to quote two contrasting examples from my life as well.

    My Dad applied for ICICI Bank IPO in 1998. He purchased 100 shares of FV 10 at a premium of 24 (Rs. 34 per share). We still hold on to them (I purchased the shares from my Dad giving cash during the Chanda Kochhar sage). And that's over 20% CAGR.

    I was allotted 150 HDFC life shares during the IPO. I sold them few months ago at 412. Assumption was to pick it back up at 350 again. Never happened. It raced away and I don't have the shares anymore. Lesson learnt.

    So now I hold on to HDFC AMC shares with my life ;)
     
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  4. smuthukri

    smuthukri Member

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    good discussion , I had HDFC AMC which went 50% up in this volatile market .I am holding it will continue to hold it .
     
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  5. shabbir

    shabbir Administrator Staff Member

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    Nice lessons learned. Better to be learning now than later in life.
     
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  6. nirajshah

    nirajshah Champion

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  7. smuthukri

    smuthukri Member

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    Even Today , Many thanks to Shabbir , fundamental good stocks always pay for you.
     
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  8. shabbir

    shabbir Administrator Staff Member

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    The pleasure is all mine.
     
  9. chaitanya_mella

    chaitanya_mella Contributor

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    It would have looked amazing and that's why I didn't take a screenshot. Friday was the closest thing to a black swan event in investing. No one could have seen it coming. And no one can predict future events either. Not in our control. I slept blissfully as usual without worrying about how much the portfolio increased.
     
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  10. shabbir

    shabbir Administrator Staff Member

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    Thats a rare quality. I am trying but couldn't resist checking my gains on Friday nor on Monday despite the fact I am neither buying nor selling.
     
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