Having INR 1.5 crore in your bank account definitely will excite you and it seems to be dream but my friends it’s possible. Well, the good news is, it is quite easy to achieve. However, like all the good things in life, this too does not happen overnight. You need to give it time, a lot of time.
You will find your answer here.
Historically, on an average, the stock markets have generated a return close to 12 per cent – 13 per cent year on year. Going forward, I would not be surprised to see the average return improve to 15 per cent, especially considering the way ‘India Inc’ is positioned at this point.
What do I mean by ‘average return’ here? Assume the market returns for three consecutive years are 16 per cent, 4 per cent, and 26 per cent respectively. If you do the math, the average year on year return in this case is about 15 per cent.
Anyway, so how do you benefit from this 15 per cent average year on year return and make INR 1.5 crore? Quite simple – invest small amount of money, every month in a disciplined way. They call this the systematic investment plan (SIP).
I thought I’ll put some numbers and see how money would grow if one were to invest a small fixed amount of money, every month, for the next 300 months, and let it grow at 15 per cent.
For the sake of simplicity, I’m assuming one can invest just about INR 5,000 every month in a well diversified equity mutual fund.
Let us assume you can consistently invest this money in a mutual fund every month for the next 300 months. What do you think will happen to your investments?
If you add up all the terminal values of all the investment over 300 months, you will end up with a whopping sum of INR 1,37,82,804 or about 1.37 crore in short!.
Can you imagine this? A meager sum of INR 5,000 per month can lead you to such massive wealth. Mind you – a casual visit to your neighborhood bar for a fun evening with your friends will set you back by 5,000 or probably more. So in that sense, an investment of the same per month (for your future) is really not much.
But hang on a second — we were talking about INR 1.5 crore right? How will we get this amount? Well, quite simple, instead of Rs.5,000 if you stretch a little bit and decide to invest INR 5,500/- (an extra 500 per month) then at the end of 300 months you will end up with INR 1,51,61,084/- or INR1.51 crore in short. Interesting right? A decision to invest an additional INR 500 per month can lead to an addition amount of INR 13,78,280.
I think most of us can afford to invest INR 5,000 per month. If not INR 5,000, I would suggest you start with any amount comfortable, but do work towards increasing this amount over time. I’m certain the savings that you do today will help you and your family a great deal, 300 months later.
One more example, Rs 20,000 invested through a monthly SIP for about 15 years can grow to over Rs 1 crore, if you assume a rate of return of 12 per cent, says Nimesh Shah, MD & CEO, ICICI Prudential AMC.