This article is purely for the readers who want to become Crorepati or become 5 Crorepati (1 Crore may not be enough at retirement) at their retirement age. Yes, you can save 50% of your monthly investment and you would be able to accumulate the same retirement corpus by increasing your investment time horizon. I have taken an assumption of equity mutual funds to become Crorepati at retirement rather than investing in PPF or fixed deposits for which you need a lot of money to invest per month to become Crorepati at retirement.
A lot of investors in India start their monthly SIP in equity mutual funds, lets say Rs 5000 per month and they have no clear about how much they would be able to accumulate till what age. This is nothing but investing, not financial planning and I always say, just investing in mutual funds is not entire financial planning for your financial goals like retirement planning, child education, child business, child marriage. The logic behind this is, you would stop your SIP after some years, may be after 5 years when you would require money for some other purposes because you have no clear goal as to for what you are investing for and how much you would be able to accumulate
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Ram, aged 40 wanted to become Crorepati in next 15 years i.e at the age of 55. As per the advice from his mutual fund agent, he is most likely to become Crorepati after 15 years if
- He invests in equity funds
- Do a SIP of Rs 15000 per month
- Invest for 15 Years
- Assume a Rate of Return of 15% from investments in a long run
This would give him 1 Crore at Retirement after 15 years.
After reading the above material, Ram thought, it would be quite difficult for him to shell out Rs 15000 per month as investment to become Crorepati (he wont be able to afford)
But he didn?t knew that if he increase his investment horizon from 15 years to 20 years and decide to retire at the age of 60, how would have to invest only Rs 6700 per month, other things remaining same and he would be able to become Crorepati. He can also become a Crorepati, if
- He invests in equity funds
- Do a SIP of Rs 6700 per month
- Invest for 20 Years
- Assume a Rate of Return of 15% from investments in a long run
Now in this case, you are able to save 56% (Rs 8300 per month) from your monthly SIP amount that goes towards equity mutual funds which is quite significant.
Now another important point to notice over here is that if he invests Rs 6700 per month for only 15 years, he would be able to accumulate only 44 Lakhs and he would fall short by Rs 56 Lakhs from his retirement goal. So there is an important learning over here: just stay invested as the power of compounding takes its major effect during the later stages of the investment period.
Increase your investment time horizon and decrease your investment amount to get the same amount if you are unable to afford the desired investment amount today
Post Your valuable comments if you agree or disagree with the opinion shared in the article
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