Size Matters

 This is something I heard from a former line manager almost a decade ago

 "100% of nothing is still nothing"

 At the time I was working in sales a lot of our business review meetings used to track percentage growth. It was in this context that he had mentioned those those wise words. Size does matter. 

 Which is why in the investment process building that initial corpus is so critical. We often get bogged down by conversations around percentage returns and constant investment activity. This may involve constantly churning the portfolio by trying to chase higher returns. And herein lies the problem. How many times have you heard a friend or an office colleague wax eloquent about a recent investment they made only to find out that they own a mere 10 or 20 shares? While I understand that we all need to start somewhere, these shares will do little or nothing even if the returns are significantly high. In other words a high return against a small investment will still be small. 

 The initial years need to be focused on building the base. Save aggressively even to the point of depriving yourself of some luxuries. Remember the magic of compounding starts looking very interesting only once you have built a certain base value of your portfolio. A 10% return on 1 crore equates 10,00,000 while a 20% return on a portfolio of 1,00,000 he's a mere 20,000.

 Hence as you begin your investment journey remain focused on building the size of your portfolio. Once you have built a reasonable size even an average return will be substantial. But to get there your focus in the initial years needs to be on extreme savings and investment. Once you have built your initial capital there is no looking back.

How not to invest. Click here