Ever wondered how Rakesh Jhunjhunwala made Rs 46,000 crore from a humble Rs 5000? He made his First Investment in TATA Tea in 1985 and managed to Triple it up in the next 6 Months, but his BIG bet which helped him strike gold was his Investment in TITAN, he invested in Titan at a time when no one would have known it or would just ignore it. Titan in 2003 was priced at Rs 30-32 (today Rs 2750) and was in bad shape for multiple reasons. His family’s current holding in TITAN is worth nearly INR 11,000 Crore or one-fourth of his overall asset base of INR 40k+ Crore.
Apart from TITAN many of his other bets paid off, like AGRO TECH FOOD Ltd, Autoline Industries, BILCARE, and others. He was a trader as well and made a killing during Harshad Mehta Scam by shorting the markets. But Yes, his Wealth Builders were companies that he caught young at their initial growth stage. He never bought something which was mature and looked stable, rather took the risk to generate higher returns.
Going purely by numbers, the Journey from Rs 5000 to Rs 46,000 Crore in 37 years turns out to be a CAGR of an incredible 74.69%, which is extremely difficult to attain, so there is a good possibility that he did add fresh capital.
Insight from Jhunjhunwala’s way of Investing:
Blue-chips can help to beat inflation, but Young Companies will only help you Build Wealth. – SNMA WEALTH.
What are Small & Microcap Stocks?
- Large-cap Companies: Top 1 and 100 Listed companies by full market capitalization.
- Mid-cap Companies – Between 101 and 250 listed companies by full market capitalization.
- Small-cap Companies – Beyond the first 250 listed companies by full market capitalization.
- Other Way to Define it, is in terms of Size, though it varies: Large-cap companies have a market cap of Rs 20,000 crore or more, Mid-cap companies are between Rs 5,000 crore and less than Rs 20,000 crore. Small-cap companies have a market cap of less than Rs 5,000 crore.
What is Market Capitalisation ? (Market Capitalization = Outstanding Shares * Price of a share) Total value of all outstanding shares of a company.
It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 2 crore outstanding shares selling at Rs 50 a share would have a market cap of Rs 100 Crore.
So Small Caps are young companies, very volatile, but offer significantly high growth potential to long-term investors who can tolerate volatile stock price swings in the short run. Also, these are the companies for which very little research is available in the public domain, hence it’s strongly advised to opt for The mutual fund route in this category as it helps you diversify into a bigger base of companies with much superior insights and is professionally managed by the Fund Manager who has decades of experience in Cherry picking the right Company.
How Small Cap Funds have delivered?
Impact Small caps can create in your portfolio:
- In 20 Years, on Just INR 10 Lacs Investment, an Annual 5% difference in return can be as BIGG as INR 1.34 Crore and in 30 years it snowballs to over INR 8 Crore. Massive difference.
- This is the TADKA that every long-term investor should have in their Equity portfolio. Just having it is not enough, it should form a significant part of your portfolio if your goals are 8-10 Years away.
- It has the Power to significantly increase your overall portfolio returns. But it comes at a price of high volatility and at times some heartache.
You may ignore this Powerpack because of its high Volatility, but this is the potential Game changer. Calculated risks are an inseparable part of growth.