Investing for Real People: Thumb Rules, Long-Term Thinking & Practical Wisdom 27Nov2025
(The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
If you’re a young investor in India, there’s a good chance you’ve heard the hype about initial public offerings or IPOs, trading options and trying to make quick gains in the stock market. “Double your money in three years”—that’s the kind of goal people love to chase.
It sounds great, but here’s the truth: chasing quick wins often leads to big losses and more importantly, it often completely derails long-term wealth-building. Let’s talk about why the real secret to growing wealth lies in slow, steady investing and how some of the most successful people in the world have done this.
Back in the 1980s, many illiterate bank depositors in India judged investments by one simple metric: could their money double in five years?
Surprisingly, despite all the apps, investing courses and information today, young and tech-savvy equity investors in India still ask the same question. It’s funny how our financial aspirations stay constant, no matter how much the world changes. A simple Rule of 72 could answer investors' question on doubling their money (more on this rule later).
Harry Markowitz, the Nobel laureate behind Modern Portfolio Theory, revolutionised investing by showing that it’s not about chasing the next big stock but about balancing risk and return through diversification. He advocated simple, steady, long-term investing—not betting everything on high-risk ideas.
Yet many young investors still try to get rich quickly, especially through leveraged options trading, which can wipe out a portfolio overnight. Instead of relying on risky shortcuts, it’s far wiser to build a diversified portfolio and let wealth grow gradually over time.
The idea of annualised returns still isn’t intuitive for many young, educated investors in India. Yearly interest feels abstract, while the old heuristic—one rupee per month interest on 100 rupees principal—is familiar and comfortable.
But they often struggle to translate that simple rule into a nearly 12% annual return. These are extremely smart people in their own fields, yet when it comes to understanding returns, they still rely on basic, ingrained shortcuts.
Power of compounding
Investors need to understand the concept of compound interest by focusing on long term investing goals. Many are still stuck in the old paradigm of doubling one's money in five or six years; or the simple interest concept of one rupee per month interest on a hundred rupees principal.
Let us understand compound interest with a few examples. But before that, a few words about regular savings through dollar-cost averaging.
Dollar cost averaging is an investing tool where you invest a fixed amount at regular intervals, regardless of market conditions, to reduce the impact of market volatility over time.
The popular name for dollar-cost averaging in India is monthly systematic investment plan or SIP, whereby investors, especially the salaried class, invest their savings regularly in mutual funds of their choice.
If you invest a SIP of Rs 1,000 over 20 years consistently, your money would have grown to Rs 9.89 lakh assuming an annualised return of 12%. If you keep continuing the monthly SIP for another 5 years, your money would have almost doubled to Rs 18.79 lakh over 25 years (see chart below).
This is the power compounding working for you.
Now, let us flip the question: how much return you need to earn to achieve the same goal of Rs 18.79 lakh, but over 20 years, with the same monthly SIP of Rs 1,000? You need to assume a very high return of 16.6% to get the same maturity value of Rs 18.79 lakh -- it's highly speculative and such high return expectation is not desirable for ordinary investors.
Let us pose one more question: how much monthly SIP you need to invest to achieve the same goal of Rs 18.79 lakh over 20 years assuming the same 12%? You need to almost double your monthly SIP to Rs 1,900 to achieve the same maturity value of Rs 18.79 lakh over 20 years -- it may not be practical for many investors to double their SIP in order to achieve the maturity value in 20 years instead of a more reasonable 25 years.
The point here is: investors will be better off postponing their investment horizon by 5 more years, instead of trying to double their SIP amount or increasing their expected rate of return, which may not be feasible in many cases.
You can play with your desired rates of return, different time horizons and monthly savings to achieve your investment goals. Weblinks for the SIP calculators are provided at the end of the article.
Chart showing maturity values at different time horizons and assumes annual returns for a monthly SIP of Rs 1,000 >
Real versus nominal returns:
When we say 10% or 12% assumed return, we're talking about nominal return, without adjusting for the impact of inflation. There is a difference between nominal and real return. In simple terms, real return is nominal return minus inflation rate. So, we are basically subtracting inflation rate from nominal return to arrive at real return.
Simply put, we save money for future consumption. If you're unable to grow your money over and above the inflation rate, you are basically losing your money's purchasing power. So, to build long-term wealth, you need to aim for returns that are above the future inflation rate so that the purchasing power of your money does not erode in future.
Investors need to be aware of the simple concepts of nominal and real returns.
Ruin versus Loss:
In investing, a loss is a normal part of the journey—it’s when the value of an investment temporarily drops or underperforms expectations. A ruin, on the other hand, occurs when the loss is so large that it prevents you from recovering or continuing to invest.
Losses are manageable if your portfolio is diversified and your risk is controlled, because time and compounding can help you bounce back.
During Mar2020 COVID-19 outbreak, investors lost 30% to 40% of their portfolios in a matter of just one month. And it took four to six months for the portfolios to recover their losses provided they stayed invested. Such losses are normal.
Ruin usually happens when you take excessive risk, use leverage, or put all your money into a single high-stakes bet. In short, losses are lessons; ruin is catastrophic and often irreversible.
Bill Hwang’s Archegos Capital collapse in 2021, which wiped out nearly USD 20 billion in just three days, is a stark example of “ruin” versus a normal investment loss. Unlike a temporary dip, his highly leveraged and concentrated positions left no room to recover, turning losses into catastrophic ruin. Bill Hwang's ruin led to the collapse of a major Swiss bank is a different matter.
What might have been manageable losses became irreversible because risk was magnified and poorly controlled. The lesson is clear: without diversification and prudent risk management, a single wrong move can destroy capital entirely.
Long-term orientation
The strategy of having a long-term orientation isn’t something new—some of the smartest people in business have followed a similar approach when it comes to long-term wealth. Take Hollywood filmmaker George Lucas, for instance. When he negotiated the deal with 20th Century Fox for the Star Wars franchise in mid-1970s, he didn’t go for a big upfront fee.
Instead, Lucas negotiated a brilliant, lucrative and long-term deal that gave him two crucial rights, namely, full merchandising rights (the rights to all toys, games and other tie-in products) and sequel rights (the rights to make any subsequent films in the series). Over long term, Lucas made billions of dollars from his rights.
So is the case with another filmmaker Steven Spielberg. Steven Spielberg, like George Lucas, prioritised a share of a film's gross profits over a high upfront salary for his biggest hits like Jurassic Park, resulting in massive earnings. This profit-sharing approach, including backend profits, has made him one of Hollywood's wealthiest directors.
Additionally, a key source of his enduring income is a long-standing deal granting him a percentage of revenue from Universal theme park attractions based on his movies.
That means they didn’t try to grab quick cash; they focused on the long-term payoff, knowing that the true value would come over time. Their focus wasn’t on immediate returns; it was about having the patience to wait for future rewards.
Then there’s Aditya Puri, the former CEO of HDFC Bank. When Puri left his lucrative job at Citibank to take over the untested HDFC Bank in the 1990s, he didn’t take the high-paying, instant gratification route. Instead, he chose a much smaller salary (around one-fourth of what he was drawing at Citibnak) and focused on building a long-term, sustainable business.
It wasn’t a quick win, but over time, HDFC Bank became one of the most successful and trusted banks in India. This was another example of someone who prioritised long-term growth and patience over immediate rewards.
So, when it comes to investing, why not follow these tried-and-true principles? Instead of aiming for those unrealistic 20 or 25 per cent returns or doubling your SIP to achieve your goal in 20 years, why not extend your investment period by just five more years to reach your target with reasonable returns?
By doing so, you take the pressure off yourself and let your investments grow steadily with the power of compounding. This is how most wealthy individuals build their fortunes—slowly, steadily and with time on their side.
Let’s go back to the basics and remember that simple heuristics often work better than complex strategies. Instead of trying to time the market or chase quick profits, focus on doing something simple like regular monthly dollar-cost averaging in a well-diversified portfolio. Many young investors in India still ask, “Will my money double in four or five years?”
Well, the reality is, if you just stay invested in good, diversified assets with an average return of 12 to 14 per cent, your money will definitely grow—just over a longer period. And if you don’t want to wait for 25 years, you can simply save more each month to reach your goal faster.
Thumb rules
Investment heuristics are simple, rule-of-thumb shortcuts that help investors make quick, practical decisions without complex analysis.
Take a page from Markowitz—balance your risk, stay diversified and be patient.
Harry Markowitz was once quoted as saying that he personally kept his own portfolio split evenly between stocks and bonds, instead of following his own complex strategies he advocated in his modern portfolio theory. He opted for a simple and basic 50/50 stocks/bonds mix for his personal investments (more on this from Jason Zweig).
Some common thumb rules in investing:
The 60/40 Rule (Stocks/Bonds mix): A classic asset allocation rule where 60% of the portfolio is in equities and 40% in fixed income. Or, one can go for a variant like, 70/30 where 70% is in equities and 30% in bonds. Or, even a 70/20/10 Rule where 70% goes for equities, 20% for bonds and 10% for gold.
The Rule of 72: This is a quick way to estimate how long an investment will take to double, given a fixed annual rate of return. Divide 72 by the annual interest rate (expressed as a percentage). For example, with a 12% return, it would take approximately 6 years (72 ÷ 12 = 6) to double your money.
The 4% Rule (in the US): A guideline for sustainable retirement withdrawals: In theory, you can withdraw 4% of your retirement savings per year (adjusted for inflation) and not run out of money over a 30-year retirement period.
The 80/20 Rule (Pareto Principle): While more often applied in business or economics, in investing it can mean that 80% of your returns come from 20% of your investments, or that 20% of your assets should be high-risk, high-return investments (for example, stocks) while the other 80% is in safer, lower-risk assets.
The 100 Minus Age Rule: This is another asset allocation rule of thumb, suggesting that the percentage of your portfolio allocated to stocks should be 100 minus your age. So, a 30-year-old would allocate 70% to stocks and 30% to bonds, and so on. Or, one can even go for a more aggressive '120 minus age' rue.
The 3-Fund Portfolio: A simple and well-diversified strategy that recommends investing in just three types of funds: Domestic stocks, international stocks and bonds. It’s designed to keep things simple while still diversifying across different asset classes.
The 50/30/20 Rule: A guideline for managing personal finances, where 50% goes to needs, 30% to wants, and 20% to savings or debt repayment. For investing, the idea is to allocate a portion of income to various investment vehicles based on this rule.
The Emergency Fund Rule: A rule that says you should keep six to nine months' worth of living expenses in cash or cash-equivalents (like a savings account or a liquid fund) to protect against emergencies. It helps ensure you're not forced to sell investments in a downturn.
These rules don't guarantee success, but they offer simple guidelines for managing investment portfolios and financial planning. They're helpful for investors who want to balance risk and reward without over-complicating things.
Avoid chasing high-risk leveraged options trades and instead focus on long-term strategies that will allow your money to grow naturally over time. Stick to those basic principles and you’ll see your wealth building up steadily, without the stress of trying to get rich quick.
Conclusion
Ultimately, investing isn’t about making wild bets or chasing wild returns for wealth creation or even trying to time the market perfectly—it’s about being consistent, saving regularly and having the patience to let your investments grow over the long haul.
Harry Markowitz showed that portfolio diversification reduces risk by combining assets that don’t move in perfect sync. Instead of chasing the highest-return asset, the idea is to build a portfolio where different investments balance each other out.
In practice, this means a well-diversified portfolio can deliver more stable returns over time without requiring the investor to take excessive risk.
Whether it’s negotiating long-term deals like Lucas and Spielberg, or building wealth like Aditya Puri by focusing on sustainability, the richest people in the world all have one thing in common: they played the long game. And trust me, that’s the game you want to be playing too.
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Tweet 11Jan2019 Harry Markowitz on 50/50 stocks/bonds portfolio and clarification from Jason Zweig
Tweet 18Nov2017 Harry Markowitz on Modern Portfolio Theory (MPT)
Tweet 01Nov2025: growth and power of compounding (at various rates of return)
SEBI SIP calculator
SEBI goal SIP calculator
SEBI all calculators - personal finance
Groww SIP calculator
Value Research SIP calculator
(Note: for some reason, the results from Groww and Value Research SIP calculators differ from those of SEBI SIP calculator)
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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
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