- Consistent small investments over time can build substantial wealth through compounding
- Starting early with Rs 5,000 monthly can grow to Rs 1 crore in 25-29 years via SIP or gold
- Mutual funds and gold offer higher returns but come with higher risk and volatility
Building substantial wealth does not always require hefty investments. The alternative approach is to ensure consistency and have patience. Historical trends have shown that even small, consistent investments over time have the potential to grow into a meaningful corpus.
ALSO READ: Starting At 27? Here's The SIP Plan You Need To Build Rs 1-Crore Corpus
If one starts early, an amount as small as Rs 5,000 can result in a corpus of Rs 1 crore. The time needed for such an investment journey can vary depending on the asset. However, what matters more here is how the power of compounding can help accelerate this journey without hurting the investors' pockets.
When thinking long-term, choosing assets with high-risk can help to reach the goal faster, while spreading volatility over the years. For instance, mutual funds - Systematic Investment Plans (SIPs) or gold investments are ideal for the long term. Though their returns are not guaranteed, these assets are known to have historically rewarded investors with high returns.
On the other hand, options such as fixed deposits or public provident fund (PPF) also exist, but their modest returns may take significantly longer to reach the same goal. Eventually, deciding on the right asset depends on an investors' risk appetite and investment goals.
Rs 1 crore goal via SIP:
SIP amount: Rs 5,000
Investment duration: 25.5 years
Expected rate of return: 12%
Invested amount: Rs 15,30,000
Estimated returns: Rs 85,72,957
Total value: Rs 1,01,02,957
Rs 1 crore goal via gold:
SIP amount: Rs 5,000
Investment duration: 29 years
Expected rate of return: 10%
Invested amount: Rs 17,40,000
Estimated returns: Rs 85,19,021
Total value: Rs 1,02,59,021
Rs 1 crore via PPF:
Yearly investment: Rs 60,000
Return: 7.1%
Time needed: 37 years
Investment: Rs 22.2 lakh
Interest: Rs 83.27 lakh
Maturity: Rs 1.05 crore
As seen in all three cases, different assets can take different time periods to reach the Rs 1 crore target depending on their returns. When returns are lower, not only it takes more time, but also higher investment value as the power of compounding is less effective.
Also Read: Start With Rs 10,000 A Month: Can You Still Build Rs 5 Crore By Retirement?
To accelerate this process, investors can also choose to use the ‘step-up' SIP technique. This includes increasing their investment contribution yearly to align it with their income growth.
Investors with lower risk-appetite may also choose to use a mix of these assets to reach their goal. In any case, it is best to consult with a financial expert before making long-term investment decisions.
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