This weekend I was going through a reverse CAGR formula and what it implies if one just buys and holds for 10years with regards to compounding.
https://cagrcalculator.net/reverse-cagr-result/
Principle amount 10lakh
No tinker buy and hold 10years
Let's take 3 examples
HDFC bank historical 10 year CAGR of 25% (source valueresearchonline.com)
Bajaj finance historical 10 year CAGR of 80%
Bank FD let's take current interest rate of 8%
Taxation will be different for FD and equity long term holdings
What one may get
HDFC bank 93lakh
Bajaj finance 35.7 crores
FD 21.5lakh
If we do invest in Bajaj finance and hold, it may be unsustainable to grow at 80% for next 10 years but...
One is most likely to get a CAGR of somewhere between 25 to 80, so between 1Cr to 35Cr.
Worst case scenario it behaves as badly as an FD, still one would save on taxes
Another scenario of doomsday etc least probable.
I am not implying that one should invest all his money in equity, that's stupid ofcourse, but just invest 10lakh when he has time on his side and forget to mess with it.
Sometimes I feel most of us try too hard to create wealth trading even tick charts, and still failing miserably both financially and emotionally....
Thing is trading may not be for everyone, but the above can be achieved by most.
Vivek