Rupakumar Pradhan, CFPCM, CWM®

Personal Financial Advisor

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Want To Become A Crorepati With Nominal Income?

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Want To Become A Crorepati With Nominal Income?
June 22
13:26 2017

 

What does it take to get my first ‘One Crore’ in savings? How to accumulate it? It is possible to create once crore worth assets in my life time? How does one become a crorepati? Is it possible to become a croepati with a nominal income of Rs. 20000/ – per month?

I used to interact with many people across different strata of society who comes to us for personal financial advice. It’s a question that remains dominant in the interaction.

One common question I come across is how to become Crorapati?

I want to provide an answer for this question through this page, as how to make one crore and much more, practical ways to become a crorapati with nominal income per month.

Many individuals would dream to become Crorapati. However, only few would plan and achieve. Many of us struggle throughout our lives to ensure that we can become one, and until and unless one is a big corporate honcho or high profile businessman, such dream remain a dream for the ordinary middle class Indian.

My primary aim of this writing is to show you how an ordinary person can become a crorapati in his life time, provided he has a good financial plan and, more importantly, the willingness to implement that pan systematically.

Crorepati = 100 lakhs – A big amount for a middle class family.

Many of us first start earning money, do small savings and then try to make several lakhs and then become crorapati. However, if your target amount is 1 crore then think about your required interest rate and investment time horizon. Do you want to achieve it through one time investment (lump sum) or small amount investing regularly? Check out how by investing a fixed lump sum amount annually or monthly for a particular period of years at a fixed rate of return you can massively grow your money.

If you want to become crorepati in 5 years, you have to invest Rs. 102,398/- every month.

If you want to become crorapati in 10 years, you have to invest Rs. 29,739/- every month.

If the time horizon is 20 years, then the investment amount per month is only Rs. 4,267/- for creating 1 crore. If you invest Rs. 30,000/- mentioned above for 20 years then you would have a whopping amount of Rs. 7,03,04,616 (Rs. 7.03 Crore).

If you can increase the time span to 25 to 30 years respectively, then the monthly investment come to only 1,717  and  Rs. 698/- respectively for achieving 1 crore.

If you want to invest an one time amount to achieve a target of Rs. 1 crore then the investment amount is:

Rs. 43,71,092 (43.71 Lakhs) Lakhs for investment tenure of 5 years

Rs. 19,10,645/- for investment tenure of 10 years

Rs. 8,35,160/-  for investment tenure of 15 years

Rs. 3,65,056/- for investment tenure of 20 years

Rs. 1,59,569/- for investment tenure of 25 years

Rs. 69,749/- for investment tenure of 30 years

I have assumed an annualized return of 18% for above calculations.

During the last 35 years, Sensex has given 18%+ annualized return. Compared to it gold has delivered annualized return of just 6-7%. While bank deposits is currently giving around 6-7 percent for a 10 years fixed deposit. For past 20-25 years bank interest rate scenario, rate of interest is decreasing year on year basis. In the past diversified equity mutual funds have provided returns far superior to the Sensex. Please note: Mutual Funds investments are subject to market risk.

India’s equity mutual fund schemes, with over two decades of track record, have made hefty wealth for investors. Investments made through the monthly systematic investment plans, popularly known as SIPs, are at multi-fold valuations currently.

In my opinion, your investment horizon should be minimum 20 years or more. You will get higher return in long-term equity investments. However, an investment for 20 years may make you wealthy beyond your imagination.

For illustrative purpose:-

I have calculated annualized return (CAGR) for some mutual funds to give you all some ideas about mutual funds past return. Please go thru below table to know the annualized return. In Indian mutual fund market, some other funds have completed 10 years but we have taken some funds to just know about the annualized return in mutual fund schemes.

This explains the fact that the longer the investors stayed, the more is the wealth creation, irrespective of the market fluctuations. The Indian mutual fund sector, still considered to be in nascent stage, given the poor penetration of its products, is home to several schemes which have a reasonable and respectable performance chart for a period exceeding 10- 20 years with annualized return (CAGR) of 14.76% to 29.62%. All these are 10-year-plus funds and have made handsome annualised returns of as high as 29.62 per cent for investors.

Mutual fund schemes provide good returns in long term. One can consider average annualized return of 12% to compute the wealth that can get accumulated in long run if one is ready to invest every month through SIP.

If you start at the age of 25 and want to become Crorepati at 60 years age (35 years tenure), you just need Rs. 1540/- per months SIP

Invest in equity mutual funds early, if you want to benefit from the power of compounding.  If you start late, you will have to increase your SIP amount to get to your Rs. 1 crore target. Let’s consider the following scenario, wherein you wish to become a crorepati at age 60 and are investing in an equity mutual fund with a rate of return of 12 percent per annum –

  • If you are 20 years of age, and your goal is to accumulate Rs. 1 crore by the time you turn 60, then you have to invest just Rs. 842 per month.
  • If you are 30 years old, you have to invest Rs. 2,833 per month to achieve the target of Rs.1 crore in 30 years
  • If you are 40 years old, you have to invest Rs. 10,009 per month to reach the target of Rs. 1 crore in 20 years.

Apart from this the biggest advantage with equity is taxation. Gains after one year from equity are completely tax free while in case of debt investments like fixed deposits, the interest is added to the income of the investor and taxed as per the slab. So, a person falling in highest tax bracket (say 30 per cent) will effectively get only around five percent interest in a fixed deposit.

Investing a lump sum amount is very difficult for a middle class family or nominal income earning member.

But everyone is and should be capable of investing small sums every month over a long period of time

I want to show you how different rate of return in your mutual fund scheme helps you to grow your wealth and achieve your financial goals. Say 12%, 15% & 20% rate of return.

Rate of return -12% pa, Rs. 5000/- investment per month:-

  • If you are investing 5000 pm for 10 years, how much would be its value? Guess? It is Rs. 11.61 Lakhs. You would have invested Rs.6 Lakhs over a period of 10 year resulting close to 2 fold rise of capital.
  • If you are investing 5000 pm for 15 years, how much would be its value? It is Rs. 25,22,880. You would have invested Rs.9 Lakhs over a period of 10 year – close to 3 fold rise of capital.
  • If you are investing 5000 pm for 20 years, how much would be its value? Check it? It is Rs. 49.95 Lakhs. You would have invested Rs.12 Lakhs over a period of 10 year – 4 fold rise of capital.
  • If you are investing 5000 pm for 25 years, how much would be its value? Hold your breath, It is Rs. 94.88 Lakhs. You would have invested Rs.15 Lakhs over a period of 10 year- 6 fold rise of capital.
  • If you are investing 5000 pm for 30 years, how much would be its value? Wow! It is Rs. 1.76 Crore. You would have invested Rs.18 Lakhs over a period of 10 year- close to 10 fold rise of capital.

Rate of return -15% pa, Rs. 5000/- investment per month:-

  • If you are investing 5000 pm for 10 years, how much would be its value? Guess? It is Rs. 13.93 Lakhs resulting close to 2.32 fold rise of capital.
  • If you are investing 5000 pm for 15 years, how much would be its value? It is Rs. 33,84,315 resulting close to 3.76 fold rise of capital.
  • If you are investing 5000 pm for 20 years, how much would be its value? Check it? It is Rs. 75.79 Lakhs resulting 6.31 fold rise of capital.
  • If you are investing 5000 pm for 25 years, how much would be its value? Hold your breath, It is Rs. 1.64 Crore resulting 10.94 fold rise of capital.
  • If you are investing 5000 pm for 30 years, how much would be its value? Wow! It is Rs. 3.50 Crore resulting close to 19.47 fold rise of capital.

Rate of return -20% pa, Rs. 5000/- investment per month:-

  • If you are investing 5000 pm for 10 years, how much would be its value? Guess? It is Rs. 19.11 Lakhs resulting close to 3.18 fold rise of capital.
  • If you are investing 5000 pm for 15 years, how much would be its value? It is Rs. 56,71,475 resulting close to 6.30 fold rise of capital,.
  • If you are investing 5000 pm for 20 years, how much would be its value? Check it? It is Rs. 1.58 Crore resulting 13.17 fold rise of capital.
  • If you are investing 5000 pm for 25 years, how much would be its value? Hold your breath, It is Rs. 4.31 Crore resulting 28.75 fold rise of capital.
  • If you are investing 5000 pm for 30 years, how much would be its value? Wow! It is Rs. 11.68 Crore resulting close to 64.89 fold rise of capital.

Income Importance

Income doesn’t play such a significant role as most of the investors think. Even if you invest a small amount, but you put it into the right place, you can still become a Crorepati.

What I am talking about is the investment phenomenon known as compounding interest, which will continuously increase the value of you holdings.

“Power of compounding is the eighth wonder of the world. One who understands this, earns it……. and one who does not……, pays for it.” -Albert Einstein

Do you really desire wealth in your life?

Do you dream of becoming a crorepati and wish to make it a reality? Then, let your money undergo the power of compounding.

Start a monthly SIP today.

An SIP is a financial planning tool offered by mutual funds that allows you to invest small amounts at regular intervals over a long period. It also allows one to use the power of compounding to generate big returns in a portfolio.

For your own benefit, start SIP as early as possible. Today is the best day!

Starting your SIP early is the first condition to becoming a crorepati.

As per my opinion “One needs to start early. This will help the investor use the power of compounding for his own benefit. Especially over a long period, the difference between starting to invest early versus starting late can make a significant difference to your wealth,”

Benefits of investing in Mutual Funds through SIP are

  • Professional Management– Ensures that the best fund managers are managing your money.
  • Diversification–  Ensures risk reduction thru investing in a broad range of securities
  • Low cost – No entry load. The annual expense ratio is around 2%+
  • Convenience and Flexibility
  • Ease of Investing – thru ECS or NACH
  • Liquidity– Ensures that you get back your money, whenever you want.
  • Transparent–  Ensures you are appraised of the portfolio regularly.
  • Extremely well regulated– Ensures that the fund follows laid down process.
  • Tax efficient – For equity Funds:   Dividends are Tax Free, No Long Term Capital Gains Tax, Short Term Capital gains tax of flat 15%

At last, I would suggest that you go for a long –term SIP which is aligned with your financial goals, not less than 10 years, so that you can become a CROREPATI.

Follow practical ways to become a crorepati.

I wish you all become crorepati and achieve your ‘Financial Freedom.’

Disclaimer: Kindly note that the above illustration is based on past performance. Mutual fund investments are subject to market risks. read all scheme related documents  carefully. Past performance may or may not be repeated in future. The products do not offer any guaranteed or assured returns whatsoever.

 

I am a CERTIFIED FINANCIAL PLANNERCM. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

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About Author

Rupakumar

Rupakumar

Mr. Pradhan has over 20 years of experience in financial services industry. He was previously working with leading Life Insurance Companies, Broking Firms, Distribution Company, Financial Planning Company and Health Insurance Company. He has cleared several NCFM modules & is also AMFI Certified. His expertise is in Comprehensive Financial Planning, Technical Analysis, Portfolio Management, Investment Advisory, Wealth Management & Business Development.

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6 Comments

  1. Ganga
    Ganga June 22, 16:23

    Very insightful….

    Reply to this comment
  2. Pramod
    Pramod June 22, 17:32

    Yes Sir, it is a realistic approach…

    Reply to this comment
  3. Tanmaya Kumar Jena
    Tanmaya Kumar Jena June 24, 09:11

    Good analysis and super thought

    Reply to this comment
  4. SALIL
    SALIL July 04, 10:14

    NICE READ SIR.BEST WISHES FROM MY SIDE.BEST OF LUCK FOR THIS NEW BLOG.

    Reply to this comment
  5. saqti
    saqti July 14, 06:57

    quite a valuable article on fund management for a healthy future.

    Reply to this comment
  6. Rupakumar Pradhan
    Rupakumar Pradhan May 29, 10:14

    Thank you very much for your kind words and complements.

    Reply to this comment

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