When we invest based on our emotions, we end up buying high and selling low, when we should actually be doing the opposite. However, more than timing, it is the time spent in the market that helps to create wealth. It may sound simple, but this is actually quite difficult to implement. To give you a statistical reference, assuming that you had invested in BSE Sensex in 1980, after all the ups and downs, you would still have made a return of around 17% on a compounded annualised basis. This means, if you invested Rs.100,00,000 in 1980, today it would have grown to Rs.1.11 crore. The key therefore, is what is known as ‘the power of compounding’. One needs to realise that systematic investments over a period of time, albeit at slightly lower returns, are better than a one-off, fluke investment which may give extraordinary returns. If one were to have invested in one unit of the BSE Sensex on the first of every month for the past 10 years, the returns would have been in excess of 21%. The message is clear – you need not be supremely intelligent to earn reasonable returns – discipline is the key. Most of us equate investing with savings. If you are saving money, let’s say, in a savings bank account, the value of your money is actually depleting. Say you earn a 3.5% interest on your savings bank account. Assuming you fall into the highest tax bracket, you pay 30% tax, which reduces your return to 2.45% [3.5 x (100 – 30%)]. Rising inflation further dents the value of your money. The long-term average inflation in our country has been around 6% p.a. If you adjust this inflation against your returns, you’d realise that the value of your money has actually reduced, rather than increased by 3.5%! To create wealth, it is thus important to focus on increasing real returns (returns-tax-inflation) instead of nominal returns.