Building a retirement corpus of Rs 5 crore may seem ambitious, but it is not impossible. Starting early and investing regularly can help one reach this goal in around 25 years time.
Retirement planning is important because it helps maintain financial independence when regular income stops. A larger corpus can cover daily expenses, healthcare costs, emergencies and lifestyle needs without relying on others.
Factors such as inflation and rising medical expenses make long-term planning even more essential. This is why consistent investments, disciplined saving habits and a well-diversified portfolio matters for a stable retirement. The earlier one starts, the better their investments benefit from the power of compounding.
ALSO READ | India's Equity Slump Is Teaching SIP Investors A Lesson. Here's Why PGIM MF Thinks It's Not A Bad Thing
How To Start?
With more time in hands, even less money works for you. The main benefit of long-term investments is that the power of compounding can work more smartly. This allows investors to start their investment journey even with smaller amounts.
Key 5 Steps To Reach The Goal:
1. Define clear goals: Once an investor decides to accumulate Rs 5 crore, they will need to set aside around Rs 15,000 to Rs 20,000 per month from the start. This value may increase over time. As a result, one must align their goals with monthly income, other medium term goals, insurance and emergency planning before starting your investment journey.
2. Prioritize SIPs: Historical trends have shown that SIPs significantly reward investors compared to other assets. These are best for long-term growth and help beat inflation over time.
3. Don't forget debt, gold: To reach a goal such as Rs 5 crore, diversification matters a lot. Despite the long-term outlook, one must protect their portfolio from volatility. This can be done by investing in a range of assets. Some common preferences are equities, gold and debt. Depending on the risk-appetite, investors may pick higher or lower allocation in these assets.
4. Keep track of news: Market-linked investments are vulnerable to global economic developments. Without going into too much depth, one can use the available resources to keep a track of how different assets may perform in the near term. For instance, the government may revise PPF interest rates or introduce new investment opportunities in gold. These updates can help investors identify potential areas where their contribution may benefit more.
5. You must frequently review your portfolio: 25 years is a significantly long time for an investment journey. It is recommended to periodically review your investments (quarterly or annually) to ensure that the returns are aligned with your broader goal. Depending on market conditions, one may increase or decrease allocation in certain assets to maximise returns. For instance, during economic uncertainty, it is advised to stay close to large-cap mutual funds as they offer more stability.
For Rs 5 goal crore, one of the ideal scenarios of 25-year-investment journey may look like this:
Calculations On Mutual Fund Investments:
- Monthly amount: Rs 8,500
- Step Up % (annual): 10%
- Investment duration: 25 year
- Expected rate of return: 12%
- Invested amount: Rs 1,00,31,400
- Estimated returns: Rs 2,63,10,741
Total value: Rs 3,63,42,141
Investments in gold:
- SIP amount: Rs 7,500
- Investment duration: 25 year
- Expected rate of return: 10%
- Invested amount: Rs 22,50,000
- Estimated returns: Rs 77,84,177
Total value: Rs 1,00,34,177
PPF Corpus Value:
- Yearly investment: Rs 60,000
- Return rate: 7.1%
- Time: 25 years
- Total contribution: Rs 15,00,000
- Total Interest: Rs 26.23 lakh
- Final corpus: Rs 41.23 lakh
Total Investment over 25 years: Rs 1.3 crore
= Total Corpus value: Rs 5,04,65,141
ALSO READ | SIP Calculator: Rs 1 Crore Goal? Here's The Monthly Investment Needed For 5, 10, 20-Year Timelines
The above calculation shows that with a starting investment amount of Rs 21,000, one can gradually reach the goal of Rs 5 crore over 25 years. Here, mutual fund calculations take into consideration that the investor will “step-up” the contributions annually by 10%. This approach allows investors to save more over time while taking advantage of the power of compounding.
However, 25 years is a significantly long journey and Rs 5 crore is indeed an ambitious goal. While the above calculation shows a typical roadmap to reach this target, investors must note that investment journeys are never linear. As a result, it is recommended to talk to certified experts before making any significant investment decisions to avoid financial stress.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.