Greeting To Our Readers!
Becoming a Crorepati is almost a dream for every individual, but very few of them have a definite and proper plan to achieve their dream.
Well, if you are one of the dreamers, then today we have something for you, a proper strategy to become a real crorepati. Below is a simple guide that will help you get started…………..
How To Become A Crorepati?
Wealth creation typically depends on the following factors:
- How much do you save monthly?
- How much did you invest?
- How long did you invest?
- How much return do you receive?
In the above factors mentioned, what you can control is, your savings rate, your investment amount, and your investment time, what you cannot control is your portfolio returns. This is so because it depends on how the market performs which is neither in control nor predictable.
How Much To Invest To Become A Crorepati?
This completely depends on two factors, how long you are going to invest and what are your return expectations.
Understand it through the following examples:
- When you have a very short time frame, say 5 years, to become a crorepati, then your monthly investment amount will be big, around Rs 1.4 lakhs per month (assuming 10% annualized returns).
- When you have a long time, frame which says 25 years or more, to become a crorepati, then your monthly investment will be less than Rs 10,000 per month.
You might be wondering why is this so, then you must know that when you invest for a longer time frame, even your thousands can convert into crores because here the power of compounding really kicks in.
Wait! Do not get excited too early, there is something you must know, the Rising Inflation!
Did You Calculate The Rising Inflation?
Currently, we saw a hike in the petrol and diesel prices, that reached to petrol, Rs 100 a liter but you might get amazed to know that the same petrol price was Rs 5 per liter back in the 1980s!
All this happened because of rising inflation!
Inflation is simply defined as the rise in the cost of products and utilities over time. The rising inflation not only impacts your spending on essential products and utilities, but they do impact your investment badly.
Therefore, to be a ‘real’ crorepati, the impact of inflation needs to be considered.
How Much Inflation Should Be Considered?
In our country, the inflation rate is kept in check by RBI (Reserve Bank Of India) and the inflation rate for any financial year is also decided by the same.
Based on the current mandate, RBI is required to maintain consumer price index (CPI) inflation between 2% to 6%. As it is impossible to predict the exact inflation rate in the coming decades, so we will consider an inflation rate of around 6% for our calculation.
Let us how a 6% inflation impacts your portfolio!
OMG! From the above figure, we can say that a one-crore rupees portfolio will have a value equivalent to Rs 17 lakhs after 30 years – inflation would have eaten away a whopping 83% of your purchasing power!
That simply means we need a more prudent approach this time because we have to create wealth that can overcome the inflation impacts.
How Much Should You Save To Be A Real Crorepati?
Generally, with 6% inflation, a real crorepati should aim for a corpus of Rs 2.4 crores in 15 years and Rs 5.75 crores in 30 years!
Let us find out how much we should invest to reach that amount………..
If you are planning to invest for a short 5-year time frame, you would require to invest a monthly amount equal to Rs 1.8 lakh to be a real crorepati (assuming >10% annualized returns).
If you planning to invest for a much longer time horizon (30 years), you can get there by investing less than Rs 30,000 a month.
Also..........
- If your investments can be increased by 5% every year consistently over three decades, Rs 18,500 per month is good enough to start your journey to be a real crorepati (assuming 10% returns).
- If you can increase your investments by 10% annually, the starting investment can be as low as Rs 10,500 (assuming 10% returns).
The above amount calculated is all you need to invest in equity mutual funds to become a real crorepati. Now that you know how much to invest, select 3-5 good equity mutual funds and you can start your SIPs.
Plan your investment today in Equity mutual funds and get set to enjoy the journey of becoming a crorepati!
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For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).