A crorepati – a person with at least Rs 1 crore worth in savings/investments – is an image that captures the imagination of many Indians. No matter how big the figure might seem at present, the figure is certainly not out of reach, provided one can pursue the goal with discipline and perseverance.
Let’s assume a person begins to work at 25 years. For the first five years, he/she does not start to save anything. He/she starts to save and invest at 30.
He has a salaried job and can manage to save a decent amount every month.
What’s the SIP amount
If he starts a Systematic Investment Plan or SIP in mutual funds every month, he/she would need to save Rs 30,000 a month. He would also need to step up the SIP by 10% every year.
If the investor can continue this investment doggedly for 10 years, the funds that will accumulate is over Rs 1 crore – Rs 1,01,22,979 to be exact. And this can be achieved by assuming a moderate 12% rate of return on investments which is certainly attainable if one invests in the long term.
Now let’s see what will happen if he/she is fortunate to clock a slightly higher rate of return, say 13%. In that case, the amount would rise to Rs 1.06 crore in the same 10 years.
Impact of EPF
Let’s consider another factor we left out in the above example.
A salaried person is also entitled to have Employees’ Provident Fund or EPF. If we assume, our investor has a basic salary of Rs 50,000, the sum he/she accumulates in the EPF account would amount to more than Rs 30 lakh. We have assumed an average annual salary raise of 10%.
With this amount in EPF, he/she would be able to reach a cumulative sum of Rs 1 crore by just accumulating Rs 70 lakh in mutual funds through the SIP route.
He/she can reach Rs 70 lakh in mutual funds by beginning with a monthly investment of Rs 21,000. Let him increase SIP by 10% every year.
Assuming a 12% rate of return. He/she can build a corpus of Rs 70 lakh – Rs 70,86,085 actually – in 10 years.
The dream of having Rs 1 crore in personal investments especially at a young age still drives many Indians. Armed with the power of SIP and doggedly pursuing investments, one can indeed reach the goal in 10 years. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
