In India, most people start their careers at 23 or 24. This is the age when you finish college and enter the workforce. You usually get an entry-level job with a modest salary. By the time you reach your 30s, the goal is to earn a stable income and secure a mid-level role. It's also a dream for many to become a crorepati by their mid-30s.
It may sound unrealistic initially to accumulate Rs 1 crore by you reach the age of 35 years, but it can be achieved conveniently with smart planning. It needs discipline and consistency. You may even be forced to make some adjustments in lifestyle expenses to achieve your crorepati goal.
For an aggressive goal of accumulating Rs 1 crore, equity mutual funds could be a suitable choice due to their potential to generate higher returns compared to traditional investment instruments. Given the limited investment duration and the corpus goal, monthly fixed investments in mutual funds may not be able to help alone. You may explore mutual fund Systematic Investment Plans (SIPs) and consistently increase monthly contributions to reach your goal faster.
The good part is that it won't burn a hole in your pocket, even if you start your SIP with a small contribution of Rs 25,000 per month.
Let's see how to accumulate Rs 1 crore with a monthly SIP of Rs 25,000.
SIP amount: Rs 25,000
Investment duration: 15 years
Expected rate of return: 10%
Invested amount: Rs 45,00,000
Estimated returns: Rs 59,48,106
Total value: Rs 1,04,48,106
In this case, a monthly SIP of Rs 25,000 will require at least 15 years to grow into Rs 1 crore. If the target is to raise the corpus by the age of 35, it's advisable to start your investments at 20, which may become unrealistic for many.
However, by opting for a 'step-up' SIP, you can reach your target in a shorter tenure. Step-up SIPs offer an opportunity to gradually increase the investments at a certain percentage periodically, generally every year. This technique will help you to increase your SIP as your income grows, while allowing you to gain from the power of compounding.
Let's see how a step-up SIP could be helpful in reaching the Rs 1 crore goal faster:
Monthly amount: Rs 25,000
Step Up % (annual): 10%
Investment duration: 11 years
Expected rate of return: 12%
Invested amount: Rs 55,59,350
Estimated returns: Rs 47,76,940
Total value: Rs 1,03,36,290
In this case, a step-up of 10% annually can help accumulate Rs 1 crore in 11 years. This seems to be a more realistic goal if you are starting your career just before the age of 25.
For the best outcome, it is recommended to discuss your financial goals with a certified expert. As mutual fund investments a prone to market risks, a proper financial plan devised by an expert could be helpful in ensuring healthy returns while minimising risks.
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