The Rs 1 Crore Milestone: A Gateway To Accelerated Wealth Creation

For some people, making Rs 1 crore might be a glorious distant dream, while for some others, the threshold might be closer than they realise. Tweaking current investments or taking a few simple steps can help one shorten the time taken to reach this goal.

"More than a milestone, reaching one crore is a gateway to greater wealth. It represents a change and achieving all your dreams. It could be a tough journey," said Shalini Sekhri, chief growth officer of Renaissance Investment Managers.

As focus falls on the need for buying houses and more, most people might position their saving goals toward these. Now, despite the fact that most houses cost over the Rs 1 crore-mark in price, Sekhri said that fixed assets like houses are not necessarily considered an investment.

"Assets that are more liquid in nature are what are considered your investments," she explained.

The goal can be reached sooner if one starts early, as compounding works much better over a longer time frame. Time is on your side when one sets goals and invests a certain portion of their income early on. Along with an early start, controlled spends and focused goals will position one better to reach the Rs 1 crore-mark.

"Live below your means and have passive incomes. One needs to have a clear idea of the post tax income and budget accordingly," said Sekhri. Investing is not the only purpose that one sets apart. In the process of reaching the Rs 1 crore-mark, one also needs to build an emergency fund.

Amid all the talk about saving and living below one's means, Sekhri does not belittle enjoying the money one makes and savouring the process of reaching this goal.

"There the 50:30:20 rule. Where 50% goes into needs, 30% into wants or discretionary spends and 20% into savings and investments. Some can do more, while this can be daunting for some," she said.

There are three main parameters that determine the time one will take to reach the Rs 1-crore goal. First, how much time they have, the amount they can save or invest and finally the return on their portfolio.

"All these elements can impact when you reach the one crore goals. Start on the journey and one can always step up. You start earning on your return and not just capital after a certain threshold. It will be a snowball effect because of compounding," she said.

The wealth creation is much more accelerated after the investor has reached the Rs 1 crore-mark and this can be achieved with an early start paired with reasonable returns.

Asset allocation is important with balance and risk. There is a notion that taking big risks alone can lead one to the Rs 1 crore-mark, when compared to staple schemes. This is not true, as risk taken without clear strategy can at any point negatively impact the investment.

"There needs to be balance. Some asset classes have low correlation and that is important. They have different cycles and this low correlation is needed," she said. There can be a certain portion that one can allocate into riskier assets, but this needs to be planned.

"It is also not safe in the long term, as undue risk can set one back many years, making the whole process counter-productive," she said. Thus it is important to strike a balance between risk and returns of your investment.