As you seek to build your first Rs 10 lakh corpus, it can seem confusing to know where to start. A key milestone, reaching the first Rs 10 lakh sets a path for a stronger compounding method to work on your long term goals.
With consistency and careful planning, this can be achieved without much hassle. For many, the journey begins with a simple question: should you rely on systematic investment plans (SIPs), traditional savings, or a combination of both?
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While savings accounts offer easy access to money and stability, SIPs in mutual funds have historically given better returns. This pushes investors to aggressively invest in them, especially during early years. However, these investments also carry risks, and returns are not guaranteed.
To come up with an overall goal, you will need to assess aspects like your expenses, income and risk appetite. Still, keeping debt components in your portfolio can help balance it and protect you during market volatility even if you have a higher risk appetite.
As a general rule, many investors follow the popular 100-minus-age rule for portfolio construction. This approach suggests subtracting your age from 100 to estimate the percentage of your portfolio that can be allocated to equities, with the remaining portion invested in debt or safer assets.
Example:
If you are 25:
Equity allocation: 100-25 = 75%
Debt allocation: 25%
If you are 30:
Equity allocation: 100-30 = 70%
Debt allocation: 30%
If you are 40:
Equity allocation: 100-40 = 60%
Debt allocation: 40%
This means the first Rs 10 lakh can come from a mix of these assets, depending on your age. You can set a target that Rs 7 lakh should ideally come from equities, while Rs 30 lakh from debt. Every year, you will need to rebalance your portfolio as you grow old. Still, you need to be careful as volatility in SIPs may or may not lead to the desired results in short durations.
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