One often wonders how to save Rs. 1 crore in 5 years. According to the well-known 15-15-15 Rule, an investor who tries to put Rs. 1 crore in their kitty should ideally opt for a Systematic Investment Plan (SIP) of Rs. 15,000 on a monthly basis for 15 years at 15% to get that one-crore fund. Even though this particular approach is mathematically valid, it may be unsuitable for certain investors. Furthermore, the rule takes for granted that the markets will deliver 15% consistently, and one remains invested through SIP for the entire tenure. The reality, however, may be different.
Can I earn Rs. 1 crore in 5 years?
Yes, It is possible to earn Rs. 1 crore in 5 years with a well-planned investment strategy. Achieving this goal requires a disciplined approach and selecting the right investment options. You can choose from systematic investment plans (SIPs), lumpsum investments, or step-up SIPs in mutual funds. Additionally, investing in high-growth assets like stocks, exchange-traded funds (ETFs), or a combination of different investment vehicles can help maximise returns. It is crucial to regularly monitor and adjust your investments based on market conditions and financial goals. Consulting with a financial advisor can also enhance your investment strategy.
Strategy to earn Rs. 1 crore in 5 years
There is no single strategy to follow when you want to know how to save Rs. 1 crore in 5 years. You need to study your investment objectives and ever-changing market conditions and make strategic decisions accordingly. So, here’s what you need to do:
- The sooner you start investing, the better. Time can be a robust ally when compounding returns are concerned. When you start early, you allow your investment to grow exponentially. This also gives you a better head start towards your overall financial goals. The longer you remain invested, the better your chances of maximising your returns.
- If you already have created a savings corpus, leverage it wisely. Moreover, planning with all your available funds is also critical. Consider your existing portfolio’s potential and check out options to optimise it to speed up the journey to Rs. 1 crore.
Some strategies you can follow to earn Rs. 1 crore in 5 years are
1. Establish your financial objectives early
How are you going to use the money? Want to take an early retirement? Cover the cost of your kids' college education? Or purchase a second house? Establish your financial objectives first. The first step in making sacrifices or sticking to a budget is setting goals. Building wealth over time is easier the earlier you get started.
2. Plan your investment journey
After you have established your goals, you must create a plan to achieve them. A well-organised financial plan can help you focus on short-term goals like debt reduction and emergency fund establishment. Your strategy needs to be realistic and flexible for the long term. Continue to assess your development.
3. Put money into equity mutual funds
Investing in equity mutual funds can produce significant profits over time. They distribute money across a variety of diversified stocks and reduce the chance of incurring losses. The mutual fund that best suits your investing goals and risk tolerance must be chosen. Investing in mutual funds requires you to do extensive research and seek advice from a professional.
4. Tax planning
Taxes typically go unnoticed, yet they can have a big impact on your efforts to accumulate wealth. Taxes can be paid on your assets and investments in addition to the well-known sales and income taxes. You must, therefore, be aware of your tax obligations and create plans to lessen their impact. Once you make an investment in tax-saving schemes, you can benefit from tax exemptions and deductions, such as:
- Public Provident Fund (PPF)
- Equity Linked Saving Scheme (ELSS), and
- National Pension System (NPS)
How to make Rs. 1 crore in 5 years with mutual funds
Investing in mutual funds can be a smart way to achieve significant financial goals, such as accumulating Rs. 1 crore in 5 years. You can adopt multiple strategies to reach this milestone, depending on your risk appetite, investment discipline, and financial planning. Here, we will explore three main options: SIP (Systematic Investment Plan), lumpsum investment, and step-up SIP. Each method has its own benefits and considerations, illustrated with examples to help you understand how they work in practice.
Option 1 - Saving Rs. 1 crore in 5 years via SIP
Systematic investment plans allow you to invest a fixed amount regularly, usually monthly, into mutual funds. This method benefits from rupee cost averaging and the power of compounding.
Example:
Raj, a 30-year-old professional, decides to invest Rs. 1,20,000 per month in an equity mutual fund with an expected annual return of 12%. By the end of 5 years, Raj's disciplined SIP investment grows significantly, reaching his goal of Rs. 1 crore. The consistent investment approach helps mitigate market volatility and provides a structured path to his financial target.
Option 2 - Saving Rs. 1 crore in 5 years via lumpsum investment
A lumpsum investment involves investing a large amount of money at once. This strategy can be highly effective if you have a substantial amount of savings and prefer to invest it all in one go.
Example:
Neha, a 35-year-old entrepreneur, has a savings of Rs. 57 lakh. She decides to invest this amount in a high-performing mutual fund, expecting an annual return of 12%. By maintaining this investment for 5 years, Neha's lumpsum grows to Rs. 1 crore. The benefit of a lumpsum investment is the immediate exposure to the market, allowing her money to grow right from the start.
Option 3 - Saving Rs. 1 crore in 5 years via step-up SIP
Step-up SIPs allow you to increase your SIP amount periodically, typically annually. This method is beneficial for those expecting their income to rise over time, enabling them to invest more progressively.
Example:
Amit, a 28-year-old software engineer, starts with an SIP of Rs. 75,000 per month. He plans to increase his SIP amount by 10% every year. Assuming an annual return of 12%, Amit's increasing contributions help him accumulate Rs. 1 crore by the end of 5 years. This strategy aligns with his growing income, making it easier to invest higher amounts over time without straining his finances.
By understanding and implementing these strategies, you can choose the method that best fits your financial situation and investment goals, paving the way to achieving Rs. 1 crore in 5 years with mutual funds.
Also read: Direct tax code meaning