Building a corpus of Rs 5 crore remains a key financial goal in India for many, even though it can be very challenging. With the rising cost of living and inflation concerns, an amount like Rs 1 crore is now seen as a milestone rather than the ultimate financial goal for retirement.
People usually set aside a considerable amount of time for such investment journeys. Given the high value of goals, a lot of factors need to be considered. From an asset perspective, generally, mutual funds are seen as a winner. Historically, they have given impressive returns and also allow compounding to be more effective in the long term.
A 15-year investment horizon is generally considered a long period that gives money more time to benefit from the power of compounding and market cycles. Reaching a target of Rs 5 crore may require a significant investment amount.
While many assume that a longer duration means a smaller investment is enough, large investment is needed if the final goal amount is large. Assuming that someone got their hands on Rs 50 lakh savings or inheritance or by any other means, will they be able to turn it into Rs 5 crore through mutual funds?
Let's find out.
Investment amount: Rs 50,00,000
Investment duration: 15 years
Expected rate of return: 12%
Estimated returns: Rs 2,23,67,828
Total value: Rs 2,73,67,828
The calculation shows that even with a 15-year time period, building Rs 5 crore corpus using an initial investment of Rs 50 lakh may not be possible. Here, the historical average of 12% annual returns was assumed. For Rs 50 lakh to turn into Rs 5 crore during this period, markets would need to perform exceptionally well by delivering at least 17% annual returns.
As a result, investors should have a more realistic approach and consider a longer investment duration to realise their goals.
How Much Time May Be Needed?
Investment amount: Rs 50,00,000
Needed investment duration: 20 years
Expected rate of return: 12%
Estimated returns: Rs 4,32,31,465
Total value: Rs 4,82,31,465
Even after 20 years, the target falls slightly short. But by adding another four to five months to this 20-year investment journey, investors can secure a Rs 5 crore corpus with just their initial investment. However, they must note that market-linked returns are never guaranteed. That is why it is always advised to consult experts for making long-term financial commitments.
Also Read | Want Rs 1 Crore Corpus By 2036? Here's The SIP Amount You Need To Start Investing Now
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