Stretching towards the impossible

There's this concept called 'stretch targets', defined as 'a challenging, ambitious goal that goes beyond what would normally be expected or easily achievable.' 'Stretch targets' stretch the mind and make it possible to achieve something you may have considered impossible.

Here is something that Elon Musk said when he was questioned about the insane goals that he sets for his businesses, "Stop being patient and start asking yourself, how do I accomplish my 10-year plan in six months? You will probably fail but will be a lot further ahead of the person who simply accepted it would take 10 years."

In a somewhat different way, our cover story of the month is about a stretch target for mutual fund investing: can a monthly Rs 10,000 SIP get you to Rs 100 crore? When asked the question without context, 10 out of 10 people would say, "No, such a feat is impossible", and they are probably right. However, this is where Musk's concept needs to be applied. Simply setting an implausible goal and working towards it will get you much, much closer to it than someone who considers it impossible and never tries.

But a deeper psychology is at play here that goes beyond goal setting. The beauty of stretch targets in investing lies in their ambitious nature and how they fundamentally alter our behaviour and decision-making patterns. When you set a goal like Rs 100 crore, something interesting happens to your financial mindset. Suddenly, that expensive car purchase doesn't seem so important. The latest iPhone? A mid-priced Android phone may be a better choice. That's because stretch targets force us to think in orders of magnitude rather than increments.

Remember, the surest way to have more savings is to save more. Consider this: if your goal is to accumulate Rs 5 crore, saving Rs 20,000 on a purchase feels significant. But when aiming for Rs 100 crore, you start thinking about ways to deploy Rs 20,000 into high-growth opportunities. Your mental math shifts from "how much can I save?" to "how can I multiply this?" This is where stretch targets become transformative rather than just ambitious.

The counterpoint to what I'm saying is obvious. People will say that such astronomical targets can be demotivating when progress seems slow. They're not entirely wrong. The journey from Rs 10,000 monthly SIPs to Rs 100 crore is not just about returns and compounding - it's about maintaining conviction through market cycles that would test even the most seasoned investors. But here's where I diverge from Musk's '10 years in six months' philosophy. Unlike in business innovation, time is not the enemy in investing - it's your greatest ally.

The real power of stretch targets in investing lies in their ability to extend our time horizons. When you set a goal like Rs 100 crore, you're forced to think of it in decades rather than years. This longer time horizon naturally guides you toward better investment decisions. You're less likely to panic during market corrections, more likely to invest in high-growth but volatile assets, and more inclined to reinvest your gains rather than book quick profits.

So, is Rs 100 crore from a Rs 10,000 SIP realistic? Perhaps only for some investors. But that's missing the point entirely. The value lies not in achieving the exact number but in how pursuing such an ambitious target reshapes your entire approach to wealth creation. Someone aiming for Rs 100 crore might reach 'only' Rs 40 crore - but that's still far more than they might have achieved with a more 'realistic' goal of Rs 10 crore.

As we enter 2025, it's time to rethink what's possible in our investment journeys. I've always been a realist, but maybe the traditional wisdom of setting realistic goals is holding us back. In a world where technological advancement is creating wealth at unprecedented speeds, perhaps the truly unrealistic approach is to think too small.

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