At the end of one’s financial life if one were to be judged just on the money accumulated who do you think stands a better chance?

A diligent saver or a hot shot investor?

I do think it is the saver who would be a head ahead of the hot shot investor.

Let us create a story of 2 friends – same age – of 50 looking back on their investments. Both started off early and the only difference between the 2 was that one saved 25% of his Gross income and the other saved 7% of his income.

The first ‘saver’ too invested in dull boring mutual funds – an equity fund and a couple of hybrid equity oriented balanced funds. The second person started late, but went to an equity broker (main income brokerage, not management fees) who ran a PMS,

Well the first saver gets a dull steady boring 12% return on his amount invested (yes 25% constant) in an sip over a long period of time – about 22 years.

The other friend gets an average of 15% return on his amount invested (Yes 7% constant) in a PMS over the past 16 years (yes he started a little late).

Go and do your math and see who has a bigger corpus at age 60 – the retirement age for both of them.

Also the second investor has been withdrawing from his capital on a regular basis – for buying a bigger car, furnishing the house, foreign trip (come on Subra my money is for me to enjoy is it not?)

Well the more tech savvy among the readers can go and use excel to see who has more money at the age of 60!

Just trying to say that your investment behavior will decide on how much money you have at the end of your investing life than the hot shot returns that your fund manager tries to get for you. If you have no ability to salt away a big portion of your earning AND convert that into INVESTMENTS you stand a poor chance of quick economic freedom.

go figure.