Undoubtedly the greatest investor in the world, Warren Buffet, 90-year-old, bended the curve to his terms and compounded wealth. Millennials can relate to his journey and implement his advices because afterall old is gold. And do you know, you can compound to Rs. 1,00,00,000 by the time you reach 40! Sounds scammy? But it is absolutely NOT! Let’s see how you can achieve that practically!
The “Sasta Redemption”
Have you watched the 1994 American classic film – “The Shawshank Redemption”? In the movie, Tim Robbins escapes from prison through a tunnel that he had dug over the past 19 years.
It was a perfect example of patience to achieve your goal, isn’t it?
But most of the investors of today’s day and age lack the patience and want to redeem their investments whenever they see a small rise in their investment value. Or redeem the funds in loss out of frustration.
Hey, don’t worry if you have done it lately! We all have done it at some point of time.
These redemptions can aptly be called the “sasta(cheap) redemption” because you end up settling for the momentary easy option without waiting to unveil the magic of long-term investment.
Just like most of the things in the life of a millennial, money management is also influenced by the internet, which is full of opinions and suggestions. Hence, any small rise in the investment value tempts the investors to withdraw or redeem the funds and spend them for leisure stuff.
Though profitable, these sasta redemptions erode the wealth of any individual. Keep reading, because this easiest way of minting wealth will amaze you for sure!
The “Oracle of Omaha”
A young boy who started working in his early twenties as an investment salesman, went on to become the chairman and CEO of one of the world’s biggest multinational conglomerates- Berkshire Hathaway.
His name is Warren Buffet.
Buffet, the Oracle of Omaha, as he is called, has a net worth of over 85 billion USD and is the world’s sixth richest man.
The 90-year-old has been investing in other companies since 1956 and has made a career out of investing only; unlike others in the list of the richest men of the world.
So if you can’t become a Mark Zuckerberg, you can surely become a Warren Buffet; because anybody can invest in companies.
The Eighth Wonder of the World
Warren Buffet, apart from being one of the finest brains in the business, attributes the wealth he has made to the eighth wonder of the world. What is this eight wonder?
It is evident from the above picture that Warren Buffets’s assets have grown exponentially in the last few years.
So it must be that all of a sudden he started waking up much earlier in the morning and went to work, worked extra shifts and managed to earn more in these recent years. Do you really think so?
I hope that was the case, because then I would be glad to stay awake the whole night and work to see my money grow.
But this exponential growth is possible due to a factor called the “power of compounding”.
Albert Einstein called the power of compounding the eighth wonder of the world. He added, “He who understands it, earns it; who doesn’t, pays it.”
When Was This Wonder Discovered?
The power of compounding is actually the power of the compound interest that we earn on our investments.
The interest in a compounded rate of growth keeps on accumulating, which in turn accumulates even further interest. To make it simpler, let’s differentiate it with simple interest.
Simple Interest = Rate* Principal Amount
So if you invest Rs.100 at a simple interest of 7%, the amount becomes 107 after a year
The amount after 2 years becomes 107+7=114 Rs
And subsequently Rs.121 after 3 years.
Amount after 2 years = Principal (1+ R/100)^2
So if you invest 100 Rs for 2 years at a compound interest of 7%; your amount becomes Rs.114.5
And subsequently Rs.122.5 after 3 years
It’s a no brainer to see that the incremental difference between the values of simple interest and compound interest is increasing as the number of years is increasing.
This must have taken you down the memory lane. These are the same mathematical equations which you solved in your class seventh and eighth in school.
So, some mathematicians must have discovered these formulas at the first place, but we all discovered them for ourselves for the first time at the tender age of thirteen.
Re-Learning from a 90-Year-Old What We Learnt at 13
Ironically, we all mugged up the compound interest formulas in school to fetch a few marks, but forgot them when it’s real need of implementation arose to fetch additional wealth.
Today, we are learning the same lessons from Warren Buffet, a 90-year old; which we learnt at school.
For a few; who still could not recollect the school days’ mathematics lectures, rush to see the books of your nephew or niece. You will see these formulas in their school books.
Number of years of investment is the biggest factor which acts like a fuel to keep the power of compounding working for you.
I’m afraid, time is running out for you rather quickly! In that case, you have very few years to allow the power of compounding work on your investments.
Crorepati at the Age of 40 With the Power of Compounding
Yep, you read it right. And nope, it’s not a scam: You can power yourself to one crore at the age of 40 with the help of the compounding effect. This is how:
With a monthly investment of Rs.10000 from the age of 23 in an instrument giving 16% compound interest; you will make one crore.
Also with a monthly investment of Rs.15000 from the age of 23 in an instrument giving 12% compound interest; you will make one crore.
One can argue that it is difficult to invest such a heavy amount at the age of 23.
Noted! Still, one crore can be reached if Rs.6848 is invested per month with a 10% rise in this monthly investment every year, as the salary of the investor increases every year.
The crux of the matter is that the early you start; the early you become financially independent.
Becoming financially independent does not mean having huge lumps of money.
It only means that you do not have to work to earn the same monthly salary that you were earning earlier. This is a form of passive income; and monthly earnings from your investments in the form of dividends is one way to earn passive income.
The Power of Compounding Early
Most of you now must be relieved thinking you are safe as your bank already offers you compound interest and not simple interest and would want to stop reading this blog further.
Few of you will visit your bank tomorrow and ask if your account is linked with compound interest and confirm twice before you feel proud of yourself.
Well, congratulations to you for finding the right bank and evading every other bank which offers simple interest on your deposits.
So there were 99 banks in America which offered simple interest but Buffet slogged really hard to find that remaining 1 bank which offered compound interest. Do you really think that was the case? No, not at all!
Every financial instrument nowadays, including your bank account, offers compound interest only. But the maximum benefit of the power of compounding can be benefit by long term investing.
Starting early with your investments will offer that room for the power of compounding. And with time one can emulate Warren Buffet too.
Starting investment at an older age and withdrawing your capital frequently will not give great returns, as will starting early and staying invested. That is the power of compounding.
So it is just about time that you accumulate enough wealth to retire rich, if you start early.
The above picture too has got much of relevance with this topic. Tweak your brains and you will know how.
Every innings of MS Dhoni can be related to Warren Buffet’s wealth; where his strike rate increased with the number of balls he played and took India to victory on most occasions in the death overs.
We knew, it was ‘just about time’ when MS was at the crease.
We, as investors, should take a leaf out of our captain’s book and apply it to grow our wealth by giving it ample time.
The “Ye Hamare Lie Nahi Hai” group
You may come across many people who don’t want to invest the money that they earn. They believe in spending more rather than saving. Waiting for so long to reap the benefits is not their cup of tea.
But they fail to understand that investing is also a way of earning. Just as you go to the office daily to earn money, you can allow the money you have earned to work for you.
Warren Buffet says,
“If you don’t find a way to make money while you sleep; you will work until you die.” is one of his famous quotes on investing.
It must be noted here that ambition cannot be mixed with investment. One must fulfill his or her ambition, but the spare money can be put to work without wasting even a single day.
Keep it ‘Simple’ to Earn ‘Compounded’
Warren Buffet is known for his ‘simple living and high thinking’ lifestyle. He still lives in the same house in Omaha which he bought way back in 1958. He owns things which are necessary for him to carry out his day to day activities.
He advises youngsters to stay away from credit cards which ads up debt. He advises them to use the meagre to fat salaries that they earn as assets and capitalize on them to generate more funds. His dislike for luxury cars and electronic gadgets is well documented.
This most economic lifestyle from one of the richest men on earth is really worth a praise!
It is a subjective matter of choice which differs from individual to individual.
Emulating Buffet’s lifestyle is not necessary for all of us. Ambition is more important than wealth. It is important to strike a balance between ambition and creating wealth.
If creating wealth is your ambition, you have the job cut out for you. Warren Buffet’s life is your Bible in that case!
But ideally speaking (and implementing), becoming financially independent should be the goal for us.
Bend It Like Buffet
Our mind is trained to find the shortest way to any place or thing. That is how the human brain has evolved over the years. We are constantly searching for shorter paths in a straight line to reach places or get the work done.
Unfortunately, this linear approach is not so suitable when it comes to astounding wealth. The exponential approach has proven to be better. And great investors like Warren Buffet, Rakesh Jhunjhunwala, Charlie Munger, Ramdeo Agrawal are the best exponents of this exponential approach.
All you have to do is wait, wait and wait patiently for that ‘bend’ in your graph to make it rise exponentially in the later years.
It is important to document your assets- your salary, property, etc so that you can track the progress of your wealth from time to time.
Because, after all- “What gets documented gets improved.”
With such an awareness about your income, expenditure and savings you can understand the role of time to achieve financial freedom.
If the power of compounding is the eight wonder, then patience is the ninth wonder.
By documenting all the money matters and taking interest in personal finance, patience will develop as a by-product. Educating yourself is the key here.
So to round it off, you must know that:
To power your investments by way of compounding you need to start investing at an early age .
The more the time, the more compounded returns you will get .
And that’s how you too can Bend it like Buffet – the graph of your financial assets.
Private Company vs Public Company
The difference is more than literal
Do you know why you cannot buy shares of a private company?
So, can you only buy shares of a public company like ONGC, IRCTC, Indian Oil, etc.?
Then why are the shares of private companies like Infosys and Wipro listed on the stock exchange? Are these private companies to begin with?
Do you know a private company cannot have more than 200 members?
OMG! Somebody please answer all these questions.
Yes, the difference is more than literal.
Let us have a cut and dried distinction between a private and a public company.
Definition of Company
Let us take the bull by its horns and get the definitions out from the textbooks.
Companies Act 2013
A company is a legal entity that is formed by different individuals to generate profits through their commercial activities.
Majorly, a company can be classified into two strands- public company and private company.
Before knowing the difference between a public company and a private company, it is of utmost importance to check on the definitions of a public company and a private company as per the Companies Act 2013.
According to the Companies Act, 2013, a “public company” is a company which—
(a) is not a private company
(b) has a minimum paid-up share capital of five lakh rupees
According to Section 2(68) of the Companies Act, 2013, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them.
According to the Companies Act 2013, a public company has to mandate all legal proceedings which are not mentioned in the definition under Section 2(68) of the Companies Act, 2013, which pertain to a private company.
Difference Between a Public And Private Company
Let’s look at all the major pointers which differentiate a public Company and a private company.
Minimum Number of Members
In a public company, a minimum of 7 members is required to form a company; whereas a private company requires at least 2 members to form a company.
Maximum Number of Members
In a private company, a maximum of 200 members can be present to form a company; whereas in a public company there is no such restriction on the maximum number of members to form a public company.
Invitation To Public
A public company can freely invite the public for subscription, which implies it can issue a prospectus. On the other hand, a public company is prohibited from inviting the public for its share capital, which means a private company cannot issue a prospectus.
Number Of Directors
In a private company, a minimum of 2 directors is required; whereas in a public company, a minimum of 3 directors is required.
Transferability Of Shares
There is no restriction on transferability of shares in a public company; whereas in a private company there are complete restrictions on transferability of shares, through its article of association.
A public company must disclose the annual financial report; whereas for a private company, there is no such obligation to disclose their annual report to the public.
Index Of Members
In a public company, it is mandatory to maintain an index of all members in the company, whereas in a private company, it is not needed to maintain the index of its members.
The minimum paid-up capital for a private company is Rs. 1 lakhs; whereas the minimum paid-up capital for a public company is greater than that of a private company. It is Rs. 5 lakhs for a public company.
In case of a public company, it is defined that total managerial remuneration cannot exceed 11% of net profits and in the case of inadequate profit, the maximum amount to be paid is Rs. 87,500. Whereas in a private company there is no such restriction on the maximum cap for directors’ remuneration.
Quorum For Meetings
In the case of a public company, it is mandatory to have a personal presence of five members in a meeting to constitute quorum, whereas in a private company, it requires a minimum of two members to maintain a quorum for meetings.
Below is an array with a list of pointers that differentiates a public company and a private company.
|S.NO||BASIS||PUBLIC COMPANY||PRIVATE COMPANY|
|1||MINIMUM MEMBERS||AT LEAST 7 MEMBERS||AT LEAST 2MEMBERS|
|2||MAXIMUM MEMBERS||NO MAXIMUM LIMIT||CAN’T EXCEED 200 MEMBERS|
|3||INVITATION TO PUBLIC FOR SHARE CAPITAL||POSSIBLE WITH THE HELP OF PROSPECTUS||CAN’T INVITE PUBLIC FOR ITS SHARE|
|4||NUMBER OF DIRECTORS||MINIMUM OF 3 DIRECTORS||MINIMUM OF 2 DIRECTORS|
|5||TRANSFERABILITY OF SHARES||FREELY TRANSFERABLE||RESTRICTIONS ON TRANSFERABILITY|
|6||ANNUAL REPORT||COMPULSORY TO SUBMIT ANNUAL REPORT TO ROC||NOT A MANDATE TO SUBMIT ANNUAL REPORT TO ROC|
|7||INDEX OF MEMBERS||MAINTAINING INDEX OF MEMBERS IS MANDATE||NO NEED TO MAINTAIN INDEX OF MEMBERS|
|9||DIRECTORS/MANAGERIAL REMUNERATION||CANNOT EXCEED 11% OF NET PROFIT||NO LIMIT / NO RESTRICTIONS|
|10||QUORUM FOR MEETINGS||5||2|
“The best investment is in the tools of one’s own trade.”- Benjamin Franklin
It is always better to be well versed with the tools of one’s own trade and the management of the inflows and outflows.
An avid tradesman associates their trade to generate profits and simplify the trade complexities by forming a company. These differences stated above lay down the basics of companies and form a guided path for a better approach to start with a company.
Here Is Why Entrepreneurs Should Go Out and Start Networking
Don’t hide behind. Face your circles. It’s high time you start networking.
We have often watched Hindi films where protagonists aspire to be a rich men as a kid. And hence they start thinking of different business ideas to be successful.
Well, this happens in reality as well. Who doesn’t dream of starting their own business one day, right?
However, business is not as easy as eating a piece of cake. And no, you don’t need to have a Ph.D. or an MBA degree to start a business.
You just need to have clarity of thoughts; about the business idea, sales and marketing, and most importantly, NETWORKING.
Today, everyone needs everything. The circle of needs and demands has become wider. Everything in entrepreneurship is becoming more interconnected. Just like the Past, Present, and Future in the web series “Dark”.
Networking is the one and only way to get to know what’s around you. From having conversations with your parents to your fruit vendors or even your house helps, you never know what brings you to the peak of your business.
We will share our two cents to convince you enough to go out and start networking if you are a budding entrepreneur. Pardon us if these two cents become 4 or more, but you will definitely not regret reading this till the end.
Entrepreneurship And Networking
The first thing that any budding entrepreneur does, while starting their own business, is to spread the word about it.
The first set of people that they talk to are their family, friends, and even banks (for financial purposes). Although these efforts may or may not materialize into something fruitful, you learn a thing or two about the ABCs of networking.
Networking is one way to get clarity of thoughts about your business. It’s like building a blueprint of your business in mind. You not only know the industry better but also get to know the loopholes and healthy shortcuts that will save time and increase efficiency.
In the ABCs of business, “A” stands for “recognizing the needs and expectations of people around you.”
Networking is the first step to recognize the gap between demand and supply. It’s similar to providing electricity to those areas with no light, and the idea and motivation behind it.
So now that you are still reading, let’s go further and discuss the importance of networking in entrepreneurship:
Builds Trust And Respect
You may or may not earn money every day from your business. But once you earn trust and respect in the market, there is no way that people will forget you easily.
It’s a fact.
Earning money is easy.
But earning trust and respect takes more effort.
Networking with your business peers or veterans will get you noticed. Initially, you won’t find them paying heed to you, but once they do, they are never going to leave you.
People believe in aggressive marketing to increase sales and business. But try aggressive networking instead, and there will be no stopping for you in the future.
Remember, making friends in schools and colleges? It’s a similar situation in entrepreneurship, too.
Going social is one way you get confidence in networking with people in the future.
Did you ever come across someone who would go to a restaurant with you and start talking to the waiters and receptionists?
Well, you may feel awkward about it, but that’s their first step to get to know the surrounding market.
Start from a party that you attend, be it a family party or a party with friends. Join a group of your choice and listen to the conversations. Once you get the grip of it, start by putting forth your views and then turn it around to your business idea. This may look boring and slow, but slow and steady will definitely win the race.
Today, there are many millennial-made apps, like Bumble, LinkedIn, etc. that encourage people to build an entrepreneurial network in any industry of their choice. Start posting. Start swiping right to the connections that interest you.
For that matter, you can even join dating apps to build professional connections. Your first conversation about your business will be a good ice-breaker (You’ll thank us later for this pro tip).
Don’t Be Selective In Your Own Circles
A very common mistake that most “choosy” or “picky” people do, is being very selective in deciding who to network with.
Today, almost all industries are interconnected. A top-class hospital will always need catering or food services for their staff and patients. A hotel will always want to have options for good clothes vendors for room and restaurant linen.
So if you limit yourself to one or two industries, and sideline others, chances are that you may lose a lot of opportunities.
Expand yourself. Even if you are not sure about it at first. Take that first call that says “our budget is low”, when you know that you have a different area of expertise to explore.
Your Shyness And Fear Will Only Put You Behind The Race
Entrepreneurship requires you to go “out-of-your-circles” more than going “out-of-the-box”.
You are likely to face uncomfortable situations all the time. You have to become an extrovert if you are a highly introverted person. You can’t hide from people who you dislike. You can’t say goodbye to those people whom you are done working with.
Your fear, your shyness will start putting you behind the race of a successful entrepreneur.
You have to be outspoken. Pave your way and lead it too. Take others along the way and build a huge business “family”.
Remember Abhishek Bachchan in the film “Guru”?
No, you need not be exactly like him, but you are expected to know why to be like him. And take your own decisions from the existing lessons.
It’s A Long Road That Will Definitely Lead You To Your Vision
Networking is a continuous process. You don’t stop after a certain level of achievement.
Starting a business is not enough, you have to keep it running. And for that purpose, you may need to explore your potential networks.
It’s often expected from budding entrepreneurs to network only with business-minded people to start and run a business successfully. What they don’t realize is that business is made by people, for people, and with people.
So start networking – whether virtually, or face-to-face. Get that business idea in place, get started with your plans, and you will surely reach a place where you can write “successful entrepreneur” in your social media bio.
2021’s India Is Atmanirbhar: 10 Desi Unicorn Startups
With 10 startups joining the unicorn club in just 4 months of 2021, is India moving towards Atmanirbhartha?
The Many Firsts of a Fantastic First Quarter of 2021!
The Indian startup ecosystem got an impressive start in the first quarter of 2021. As per Venture Intelligence, Indian startups witnessed the highest investment in two years, and the capital flow was $4.2 billion!
This is not all.
Most of the startups saw a three-fold hike in valuation in their recent funding rounds. And among these, 10 got valued at more than $1 billion.
And hence, the Indian startup ecosystem received its new set of unicorns.
The unicorn story of 2021 is unique.
Because it is the one with many firsts.
The first health tech, social commerce, e-pharmacy, and infrastructure technology that made its way into the unicorn club.
According to the NASSCOM report, India will have 50 unicorns by the end of 2021.
But many industry experts and research firms believe that, if the current rate continues, India would easily surpass this number.
Here is the list of 10 Indian startups that gave 2021 a pleasant start.
- Digit Insurance
- Five Star Business Finance
The Beginning of Unicorn
If you know any entrepreneur personally, you may have an idea how difficult it is to raise the funds for a startup. It is definitely not a cakewalk.
The fundraising usually begins with family and friends. And as the company expands, it approaches angel investors, and then goes for the venture capitalists for the fund acquisition.
Even though it is a tough task for any startup to gain the investors’ confidence, some horses pass this race and achieve the unicorn tag.
For those who are new to the concept of unicorn, it is a startup that has a valuation of $1 billion or more in the venture capital industry. And Aileen Lee, the founder of Cowboy Ventures, coined the term ‘unicorn’ in 2013.
And since then, startups are continuously striving to attain this prestigious status.
India Didn’t Have a Great Start
When Aileen Lee coined the term ‘unicorn’ in 2013, the United States had 39 unicorns.
You may ask, what about India?
There was only one company called InMobi, the mobile-advertising services provider, that could make it to the unicorn club.
India was nowhere closer to the US in the matter of unicorns. The reasons were many:
- Limited funding
- Inadequate infrastructure
- A plethora of social and cultural challenges
- Lack of talent
- College students found entrepreneurship unappealing compared to the management jobs in large IT firms.
- The aspiring entrepreneurs often got rejected by the prospective brides and their families.
India Slowly Picked Up the Pace
Even though India’s unicorn story had a not-so-brilliant start, the current scenario looks promising.
As per Venture Intelligence data, there were only 10 unicorns until 2018, and since then, there has been the addition of 28 unicorns.
For an Indian startup, on average, it would take up to 8 years to turn into a unicorn.
India’s oldest startups, like Naukri.com, MakeMyTrip, and Justdial, which began its operation prior to 2005, took 15 years to achieve the unicorn title.
But this period has shrunk in recent times.
A recent report by Orios Venture Partners shows that the newer technology firms are hitting the billion-dollar mark in less time than their older counterparts.
The younger enterprises such as Swiggy, Rivigo, Razorpay, and Unacademy joined the unicorn club in 5 years on average. Whereas, Udaan, Ola, Electric, and Glance took just 2.4 years!
What could be the reason for this transition?
As per the Orios Venture Partners report, the reason behind the younger startups turning unicorn sooner could be:
- The prior entrepreneurship experience of the founders of these companies
- These founders know how to secure the funds more efficiently
- The growth mindset
There are two other reasons the investors from India, and all over the world, are backing the Indian startups with their funds:
- Indian startups leveraged the changing consumer behavior and quickly tweaked themselves to satisfy the needs of the customers
- These companies started functioning on the fact that “Focus on the market and the customers will ensure your growth”
Will ‘Atmanirbhar Bharat’ Soon Be a Reality?
India’s honorable Prime Minister, Narendra Modi, raised a clarion call to the country to be self-reliant, aka Atmanirbhar in all senses.
He also outlined the five pillars of Atmanirbhar Bharat:
- Demography, and
You may ask, how startups can help in making India self-reliant?
The Indian startup ecosystem had a slow and steady evolution from one sector to the other, ranging from IT/ITES to e-commerce, deep technology to hyper delivery networks.
Today, startups also have the most favorable conditions to survive and flourish, starting from the funding, development of regulatory infrastructure, global mergers and acquisitions, the influx of global investors to internationalization.
Do you know what brought this revolution to the world’s third-largest startup ecosystem?
It is the government’s mission to get as many entrepreneurial stories as possible through its programs like Startup India, Stand up India, Digital India, and Vocal for Local.
And the unicorn forms one-tenth of new industries coming into existence every year.
The increase in the number of tech unicorns is driving the investors’ interest in India’s startup ecosystem.
According to a report by NASSCOM, the startups in the technology field alone have created 60,000 direct jobs in 2019.
These data show that, if more startups come into existence, and get support from the investors and from the government, India could see a greater spike in job opportunities.
Atmanirbhar citizens make Atmanirbhar Bharat, don’t you agree?