Investment is a complex endeavor that requires the implementation of effective strategies and the continual adjustment of one’s financial profile in response to evolving market conditions. In India, many individuals aspire to become crorepatis; however, the path to achieving this ambition presents significant challenges for investors. To amass such wealth, it is essential to employ specific formulas tailored to one’s unique financial situation. There are various strategies available for both 10-year and 20-year investment horizons.
Regardless of the specific rules you choose to follow, the fundamental principle remains unchanged: consistent investment, selection of high-growth assets, and the utilization of compounding are crucial. When these principles are applied with a long-term perspective and financial discipline, they can facilitate the attainment of your Rs 1 crore objective. Let us delve into the essential investment guidelines:
The Rule of 72 is a simple mathematical concept that tells you how many years it will take for your money to double at a given rate of return. To calculate, divide 72 by the annual rate of return you expect from your investments.
Example:
12% Return: 72 ÷ 12 = 6 years to double your money.
15% Return: 72 ÷ 15 = 4.8 years to double your money.
If you want to become a crorepati in 20 years, using an investment with a 12%-15% return, your money could double several times during the period.
Also Read: Top 10 mutual funds for doubling your wealth over time
The 10-12-10 rule suggests that by investing Rs 10,000 per month for 10 years in an asset yielding 12% annual returns, you can accumulate approximately Rs 23-24 lakh. To reach Rs 1 crore in 10 years, you will need to invest more aggressively.
Breakdown:
Monthly Investment: Rs 43,000 (for a Rs 1 crore goal)
Duration: 10 years
Expected Return: 12% per annum
Example: If you invest Rs 43,000 per month in equity mutual funds or stocks with an average annual return of 12%, you could accumulate around Rs 1 crore in 10 years.
The 20-10-12 rule is a longer-term investment strategy. It suggests that by investing Rs 10,000 per month for 20 years in an instrument that yields 12% annual returns, you can reach your Rs 1 crore goal. The longer time horizon gives you more flexibility, allowing you to invest smaller amounts compared to a 10-year plan.
Breakdown:
Monthly Investment: Rs 10,000
Duration: 20 years
Expected Return: 12% per annum
Example: If you invest Rs 10,000 per month in a diversified equity mutual fund or index fund providing 12% annual returns, you can accumulate Rs1 crore in 20 years. The power of compounding plays a crucial role.
The 50-30-20 rule is a personal finance guideline that helps you allocate your income toward different financial goals. It suggests you allocate 50% of your income toward essential expenses, 30% toward discretionary spending, and 20% toward savings and investments.
Breakdown:
50%: For essentials (rent, utilities, groceries)
30%: For discretionary spending (entertainment, dining out)
20%: For investments and savings (SIPs, stocks, PPF)
To become a crorepati, you can tweak this rule by allocating more than 20% of your income toward investments. If you can increase your savings rate to 30%-40% of your income and invest in high-growth assets like equity mutual funds or stocks.
For aggressive wealth creation over 10-20 years, you can adopt the 40-40-12 rule, which focuses on maximizing savings and investing aggressively.
Breakdown:
40% Savings Rate: Save and invest 40% of your monthly income.
40% in Equities: Allocate 40% of your portfolio to high-growth equity investments like mutual funds or direct stocks.
12% Return: Aim for a 12% annual return by investing in equities.
This strategy requires financial discipline and consistent saving, but it can help you reach Rs 1 crore faster, especially if you have a long-term horizon.
The 15-15-15 rule is one of the simplest and most effective strategies for wealth creation. According to this rule, if you invest Rs 15,000 per month for 15 years in an asset that gives you an average return of 15% per annum, you will accumulate approximately Rs 1 crore.
Breakdown:
Monthly Investment: Rs 15,000
Duration: 15 years
Expected Return: 15% per annum
Example: If you invest Rs 15,000 per month in an equity mutual fund (or index fund) that provides an average return of 15% annually, after 15 years, you will have around Rs 1 crore.
The 25X rule is a retirement-focused strategy, but it can also be used for long-term wealth accumulation. According to this rule, you need to save 25 times your annual expenses to retire comfortably. For example, if you need Rs 4 lakh annually to cover your living expenses, your retirement corpus should be Rs 1 crore (Rs 4 lakh x 25).
Adhil Shetty, CEO of Bankbazaar.com, says, “When aiming for bigger financial goals, such as building a corpus of Rs 1 crore, a few investment principles are essential. Diversifying across asset classes, investing systematically through options like SIPs and optimising for tax efficiency are key strategies. Equity markets, mutual funds and emerging alternatives like digital gold can contribute to your portfolio. Begin early, maintain discipline and stay the course through market fluctuations.”
To amass Rs 1 crore or more, it is essential to adopt a long-term investment strategy that incorporates a mix of high-growth assets along with consistent contributions to retirement plans such as the Public Provident Fund (PPF) or the National Pension System (NPS). This approach not only facilitates diversification of your investment portfolio but also enables you to enjoy the advantages at the time of need.
2024-12-03T03:16:10Z