How to become rich: Every working man is looking for a big lumpsum amount that can be made available to fulfil various needs and desires of the entire family spanning home, health, education, weddings, children and more. However, there is much work required to make that happen. Working to accumulate in lakhs is just not enough, considering inflation is eating into salary and savings on regular basis. So, how much should you target to get? Rs 1 crore, Rs 2 crore or even higher. These are amounts that can fulfil some needs and provide a cushion against all kinds of financial emergencies.
These emergencies can stem from pandemics, like the current one linked to coronavirus. It has wreaked havoc across geographies. A huge number of people have lost their jobs, others have seen their salaries being cut by even 50%. Those who had no jobs to start with, are finding the situation going from bad to worse. So, those who have some money to invest, should do so. Here we explain with an example about how to become a crorepati.
The target is good, but the question is, how to become a crorepati? How do you start to earn Rs 1 crore or over? Well, you need to save big amounts on a monthly basis and then invest the same in instruments that give back good amounts in terms of profit generated. Remember, whenever you invest, risk is present, but it is more in some investments and less in others.
An investor approached Zee Business and he had made a request that he wanted to accumulate Rs 2-3 crore.
His name is Vikas Verma and he wanted to have Rs 2-to-Rs 3 crore in 10 years time. Vikas is 46 year old and keen to save money and have a big amount after a decade. To get this sum, he wanted to know what kind of amount should he invest in a lumpsum.
Notably, he has already been investing regularly especially through the mutual fund option. The amount that he can invest in a year is Rs 2 lakh. So, can he achieve his goal? Or is this sum too small?
Vikas Verma has invested in these funds:
- Axis Long Term Equity Fund Rs 1.2 lakh
- SBI Focused Equity Fund Rs 3.5 lakh
- HDFC Smallcap Fund Rs 40,000
- MO Multicap Fund Rs 40000
- IDFC Focused Rs 40,000
- PPF 3000/m
Pranjal Kamra, Founder, Finology, says that for Vikas to get his targetted amount, he will need to increase his investment.
Kamra said, “An appropriate investment strategy for your investment goal is difficult to suggest as you have not mentioned anything about your risk profile. But considering your age and investment horizon, let’s assume your risk profile to be moderate. The total Current investment value of your equity fund is Rs 5.9 lakh. Assuming an annual return of 13%, you would accumulate approx Rs 20 lakh in 10 years.”
He added, “So, in order to build the remaining corpus of Rs 1.80 crore in 10 years, you need to invest around Rs 53 lakhs as lumpsum assuming an annual return of 13%. If you want to invest annually instead of lumpsum mode, you will have to invest around Rs 10 lakh every year to create a corpus of Rs 2 crore after 10 years.”
Kamra said that considering investment amount of Rs 2 lakh per annum, it’s hard to reach the desired corpus in 10 years.
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However, there is some good news. Kamra said, “A few advisors may recommend you to go for an aggressive asset allocation to achieve an annual compounding of 18 -20%. However, we would suggest you to avoid chasing returns and target a well-balanced portfolio for steady growth and safety of your capital and therefore you need to reconsider your goal based on your savings and investment tenure. With your current investment capacity of Rs 2 lakh annually, you can reach your target corpus, only by increasing your horizon from 10 to 20 Years”.