Bottom Line ( Profits ) :-
If you earn a monthly 2 percentage income from your invested amount then it by itself is a huge profit and if you are doing more than that , you are a gold digger for sure ( as said by Mr. Warren Buffet).
Do you know why so ??
Let's cite an example -
Your investment is 10 lakhs and a 2 percentage monthly income is Rs 20000 and if you multiply with 12 months then it is Rs 240000 ( 24 percentage of your total investment ) and if you continue to get it for next 4 years then you have almost doubled it up .
Now let's see what the financial rule of doubling up says -
It says you have to divide 72 by rate of returns for then to identify the years needed to double up .
So if I divide what the mutual fund on an average gives us :+
72 by 15 RR then it will need almost 5 years to double .
But the game changer is rate of return - Recently the small cap fund of Bandhan Bank has given a staggering return of 60 percentage in an year and there are funds like Quant and Kotak small cap with staggering returns of 40 average returns.
How did they made it happen - Success lies in choosing high quality small cap stocks with very good management who is aiming 20x in next 7-8 years .
Bingo !!
You also can earn 60 percentage rate of return per year . But why the world is not investing because small caps do have the maximum risks attached and those who have crossed 50+ years , they will surely shy away from it .
So here I remember what Harshad Mehta said - Risk hain toh Ishq Hain !!
Means where there are calculated risks , the chances of growth will be higher .
Someone out there has to take risk to come up with high handsome returns and also should be ready for the back firings either .
Mark my words !! In the very new future, lot of money will flow into small caps and mid caps for high returns either via stocks of mutual funds .
But you will never see any business doing 60 percentage bottom lines for QnQ and if yes reached somehow, then the business will be doing in 1st or 2nd year of Growth only and not forever.
What is your summation of High Bottom line ?
If you have any other method, do share with us.
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