How to Make 50 Crores in 10 Years

investment plan for Rs 10 crore

After reading multiple articles on wealth creation and the power of compounding, 40-year-old Karthik is hopeful that he will retire rich. But he does not want to settle on just Rs. 1 crore or Rs. 2 crore. Karthik wants to make it big and create Rs. 10 crore in the next 20 years.

How To Build a ₹10 Crore Corpus in 20 Years or Less? | Detailed Financial Plan | How to Build Wealth

Reaching Rs. 10 crore in 20 years is not impossible, but it does not come very quickly either. To get your name into the Rs. 10 crore club, you need to first prepare a sound financial plan and then follow it in a disciplined manner. After all, becoming a multi-crorepati is a dream of many, but achieved by only a few.

To help you out with the planning part, in this blog, we will lay out multiple paths to reaching this Rs. 10 crore destination in 20 years. The idea is to ignite multiple possibilities and let you select the best possible way based on your comfort level.

Option 1 – Lumpsum Investment To Build Rs. 10 Crore

Preparing a plan to build Rs. 10 crore in 20 years may seem like a daunting task. But much like planning for any financial target, you will need to find out three things.

One, the initial investment or starting capital. Two, the annual returns. And thirdly, the duration, which in this case is 20 years.

So, one way of planning for this Rs. 10 crore target is to figure out the initial capital and the annual returns you would require to achieve over the next 20 years.

For example, if you have Rs. 10 lakh of investible surplus, then an annual return of 26% for the next 20 years will take you to 10 crores. Similarly, if you have Rs. 25 lakh as your starting investment, you will require a 20.3% annual return over the next 20 years to reach Rs. 10 crores.

Investment In Year 0 Annual Returns Target
₹10 lakh 25.9% ₹10 crore
₹25 lakh 20.3% ₹10 crore
₹50 lakh 16.2% ₹10 crore
₹1 crore 12.2% ₹10 crore

While the math is simple, the challenge remains in the possibility of getting a 20% or a 25% annual return every year for the next 20 years. You only see such stunning returns during a market rally, and it seems almost impossible to get such returns consistently over the next two decades.

Nevertheless, if history is our guide, such returns are not unprecedented. As many as 19 Indian mutual fund schemes have delivered an average annual return of 20% over the last 20 years. And these are all Regular Plans. Had these been Direct Plans, that is probably an additional 1-1.5% lift in returns.

Scheme Name (Regular Plan) 20 Year Annualized Return (%)
Nippon India Growth Fund 25.3
Franklin India Prima Fund 24.5
SBI Magnum Global Fund 22.6
HDFC Flexi Cap Fund 22.2
ICICI Prudential Long Term Equity Fund 21.9
Nippon India Vision Fund 21.9
SBI Contra Fund 21.9
DSP Equity Opportunities Fund 21.6
DSP Flexi Cap Fund 21.4
HDFC Top 100 Fund 21.2
Aditya Birla Sun Life Flexi Cap Fund 21.2
Franklin India Flexi Cap Fund 21.0
SBI Long Term Equity Fund 21.0
ICICI Prudential Technology Fund 20.7
SBI Large & Midcap Fund 20.6
HDFC Tax Saver Fund 20.5
HDFC Capital Builder Value Fund 20.5
TATA Midcap Growth Fund 20.1
Aditya Birla Sun Life MNC Fund 20.1

So, if you have luck on your side, your mutual fund scheme may deliver such fantastic returns in the long run. But you should not rely that heavily on being lucky. Instead, a prudent strategy would be to control what you can control, i.e., starting with higher initial capital.

Arranging The Initial Corpus

It is pretty unlikely that you will have Rs. 10 lakhs or Rs. 25 lakh just lying in your bank account. So, you need to consolidate various investments like FDs, PPFs, etc., that offer you 5-7% return. Because such returns are way lower than what you need to accumulate Rs. 10 crore in 20 years, after consolidating, invest this amount in good Equity Funds that can deliver double-digit returns in the long run.

For instance, if 40-year-old Karthik started a PPF account when he joined his job at the age of 25, the maximum contribution he would have accumulated in the last 15 years would be close to Rs. 30 lakh.

Year Financial Year Maximum Investment Interest Rate Balance
1 2006-07 70,000 8.00% 75,600
2 2007-08 70,000 8.00% 157,248
3 2008-09 70,000 8.00% 245,428
4 2009-10 70,000 8.00% 340,662
5 2010-11 70,000 8.00% 443,515
6 2011-12 70,000 8.60% 557,677
7 2012-13 100,000 8.80% 715,553
8 2013-14 100,000 8.70% 886,506
9 2014-15 100,000 8.70% 1,072,332
10 2015-16 150,000 8.70% 1,328,675
11 2016-17 150,000 8.10% 1,598,448
12 2017-18 150,000 7.80% 1,884,827
13 2018-19 150,000 8.00% 2,197,613
14 2019-20 150,000 7.90% 2,533,074
15 2020-21 150,000 7.10% 2,873,572

And since Karthik can withdraw from the PPF account after a 15-year lock-in, these 30 lakhs can be put to better use in achieving the Rs. 10 crore goal by moving this amount to an ELSS fund. Investing in an ELSS fund is likely to give better returns over the next 20 years and continue to offer Section 80C tax benefits available for PPF.

In addition to PPF, another source of your starting capital can be the annual bonus that most salaried employees receive once a year. This bonus is, on average, about 12-15% of the CTC. And depending on your salary, it can be a few thousand rupees or a few lakhs of rupees. Whatever the amount, it should not be ignored because every bit counts.

The idea here is to look at what you have and ensure that you can dedicate some lumpsum amount for the next 20 years. This can, in turn, accumulate to the entire 10 crores or at least a big part of it.

Option 2 – SIP To Make Rs. 10 Crore

Building a nine-figure wealth corpus needs discipline. And perhaps, the most effective way of doing that is to invest through the SIP route.

A SIP or systematic investment plan is a technique that requires investors to contribute a fixed amount of money at a predefined interval. And even relatively small SIP investments in Mutual Funds made over the long term can grow your wealth significantly.

Some SIP-related thumb rules can guide you to make a plan for creating an Rs. 10 crore corpus. One such thumb rule is known as the 15-15-15 rule.

This 15-15-15 rule says that if you continue a monthly SIP of Rs. 15,000 for 15 years, and the mutual fund scheme achieves an annualized return of 15%, then that will get you a corpus of Rs. 1 crore at the end of those 15 years.

In simple words, Rs. 15,000 a month for 15 years at 15% can give you Rs. 1 crore.

A slight modification to this 15-15-15 rule can also be handy. For instance, if you convert this rule into a 15-15-30 rule, i.e., Rs. 15,000 at 15% in 30 years, you can accumulate a corpus of Rs. 10 crore. So, if you are in your 20s or 30s, then do explore giving yourself a longer runway to achieve all your financial goals and never underestimate the importance of disciplined investing using the SIP approach.

Nevertheless, the plan here is to accumulate Rs. 10 crore only in 20 years. And secondly, you cannot pin our hopes on equities delivering an annualized return of 15%, 20%, or 25%.

So the way forward is to examine a range of possibilities based on different periods and annual returns. This can then help us determine the right SIP amount needed to contribute each month.

Monthly SIP Amount To Reach Rs. 10 Crore
Number Of Years
10 15 20 25 30
Annual Returns 9% 513,000 262,000 149,000 89,000 54,000
10% 484,000 239,000 131,000 75,000 44,000
11% 456,000 218,000 114,000 63,000 35,000
12% 430,000 198,000 100,000 53,000 28,000
13% 405,000 180,000 87,000 44,000 22,000
14% 382,000 163,000 76,000 37,000 18,000
15% 359,000 147,000 66,000 31,000 15,000

For instance, if you keep a more conservative estimate of 12% on equities over 20 years, you would need to keep aside precisely Rs. 1 lakh rupees every month to reach the target of Rs. 10 crore.

Similarly, a more conservative investor banking on a 9% yearly return would need to set aside close to Rs. 1.5 lakhs every month to reach the Rs. 10 crore goal.

In fact, if you want to play around with these scenarios, then simply head to our SIP calculator.

Option 3 – Increase SIP Amount Periodically

In a more practical sense, investments in SIPs are never static. Most investors tend to increase the SIP amount as their income grows over time. This is also called stepping up your SIPs, which in simple language means increasing the monthly SIP amount every year. This way, you can start with a smaller amount and still reach the target by increasing the investments gradually over the course of the investment duration.

For instance, to reach Rs. 10 crore, you need a monthly SIP of Rs. 1 lakh for the next 20 years at an assumed annual return of 12%. But if you don't have Rs. 1 lakh to invest at this point, the Rs. 10 crore target can still be obtained by starting almost halfway at Rs. 55,000. And then increase the contributions by 10% every year.

Option 1 Option 2 Option 3 Option 4
No Chnage In Monthly SIP Amount (Rs.) 10% Annual Rise In Monthly SIP Amount (Rs.) 22% Annual Rise In Monthly SIP Amount (Rs.) Rs. 12,000/- Annual Rise In Monthly SIP Amount
Year Monthly SIP Total Corpus At The End Of the Year Monthly SIP Total Corpus At The End Of the Year Monthly SIP Total Corpus At The End Of the Year Total Corpus At The End Of the Year Total Corpus At The End Of the Year
1 100,000 1,344,000 55,000 740,000 20,000 269,000 40,000 538,000
2 100,000 2,850,000 60,500 1,568,000 24,400 571,000 52,000 1,141,000
3 100,000 4,536,000 66,550 2,570,000 29,768 968,000 64,000 1,977,000
4 100,000 6,425,000 73,205 3,773,000 36,317 1,485,000 76,000 3,075,000
5 100,000 8,540,000 80,526 5,210,000 44,307 2,152,000 88,000 4,466,000
6 100,000 10,909,000 88,578 6,918,000 54,054 3,006,000 100,000 6,185,000
7 100,000 13,563,000 97,436 8,939,000 65,946 4,094,000 112,000 8,272,000
8 100,000 16,535,000 107,179 11,322,000 80,454 5,472,000 124,000 10,770,000
9 100,000 19,864,000 117,897 14,122,000 98,154 7,210,000 136,000 13,729,000
10 100,000 23,592,000 129,687 17,402,000 119,748 9,395,000 148,000 17,205,000
11 100,000 27,768,000 142,656 21,234,000 146,093 12,132,000 160,000 21,259,000
12 100,000 32,445,000 156,921 25,700,000 178,233 15,552,000 172,000 25,961,000
13 100,000 37,683,000 172,614 30,894,000 217,444 19,814,000 184,000 31,388,000
14 100,000 43,550,000 189,875 36,930,000 265,282 25,120,000 196,000 37,630,000
15 100,000 50,120,000 208,862 43,920,000 323,644 31,700,000 208,000 44,780,000
16 100,000 57,480,000 229,749 52,000,000 394,846 39,860,000 220,000 52,950,000
17 100,000 65,730,000 252,724 61,330,000 481,712 49,950,000 232,000 62,270,000
18 100,000 74,970,000 277,996 72,090,000 587,688 62,420,000 244,000 72,870,000
19 100,000 85,320,000 305,795 84,480,000 716,980 77,810,000 256,000 84,900,000
20 100,000 100,000,000 336,375 100,000,000 874,715 100,000,000 268,000 100,000,000

Another way is to start at just Rs. 20,000 and increase the yearly contributions by 22%. But this can be immensely challenging a few years down the line. Anyway, there are many combinations that can be explored, and every option will have its own set of challenges and perhaps sacrifices that you might have to make.

Option 4 – Combination Of SIP And Lumpsum

A combination of the lumpsum approach and the SIP approach makes the task of achieving a high number like Rs. 10 crore a lot more doable.

Let's look at this from a numbers perspective.

For example, say, we had a starting capital of Rs. 10 lakh. Now the wealth generated from this Rs. 10 lakh when compounded over 20 years is almost equal to you putting up Rs. 10,000 every month for the next 20 years. This means that instead of having to pay a lakh per month, a lower SIP of Rs. 90,000 can help you reach your target.

Likewise, if the initial lump sum corpus is higher, say, Rs. 30 lakhs or Rs. 50 lakh, then the monthly SIP amount would continue to go down.

Starting Corpus ₹0 Starting Corpus ₹10 lakh Starting Corpus ₹30 lakh Starting Corpus ₹50 lakh
Year Monthly SIP (₹) Total corpus At the End of The Year (₹) Monthly SIP (₹) Total corpus At the End of The Year (₹) Monthly SIP (₹) Total corpus At the End of The Year (₹) Monthly SIP (₹) Total corpus At the End of The Year (₹)
1 100,000 1,344,000 90,000 2,210,000 75,000 4,008,000 55,000 5,740,000
2 100,000 2,850,000 90,000 3,685,000 75,000 5,497,000 55,000 7,168,000
3 100,000 4,536,000 90,000 5,337,000 75,000 7,165,000 55,000 8,768,000
4 100,000 6,425,000 90,000 7,188,000 75,000 9,033,000 55,000 10,560,000
5 100,000 8,540,000 90,000 9,261,000 75,000 11,125,000 55,000 12,567,000
6 100,000 10,909,000 90,000 11,582,000 75,000 13,468,000 55,000 14,815,000
7 100,000 13,563,000 90,000 14,182,000 75,000 16,093,000 55,000 17,332,000
8 100,000 16,535,000 90,000 17,094,000 75,000 19,033,000 55,000 20,152,000
9 100,000 19,864,000 90,000 20,355,000 75,000 22,325,000 55,000 23,310,000
10 100,000 23,592,000 90,000 24,008,000 75,000 26,012,000 55,000 26,847,000
11 100,000 27,768,000 90,000 28,099,000 75,000 30,142,000 55,000 30,808,000
12 100,000 32,445,000 90,000 32,681,000 75,000 34,768,000 55,000 35,245,000
13 100,000 37,683,000 90,000 37,813,000 75,000 39,949,000 55,000 40,214,000
14 100,000 43,550,000 90,000 43,570,000 75,000 45,760,000 55,000 45,780,000
15 100,000 50,120,000 90,000 50,010,000 75,000 52,260,000 55,000 52,020,000
16 100,000 57,480,000 90,000 57,230,000 75,000 59,540,000 55,000 59,010,000
17 100,000 65,730,000 90,000 65,310,000 75,000 67,700,000 55,000 66,840,000
18 100,000 74,970,000 90,000 74,360,000 75,000 76,840,000 55,000 75,600,000
19 100,000 85,320,000 90,000 84,500,000 75,000 87,070,000 55,000 85,420,000
20 100,000 100,000,000 90,000 100,000,000 75,000 100,000,000 55,000 100,000,000

Therefore, this combination of an initial lump sum plus the use of annual bonuses and a monthly SIP can go a long way in building a multi-crore wealth corpus. To help you with various combinations and find out your comfort zone, we have created a simple downloadable calculator in excel. So, download the excel sheet and play around with the options to find the right combination for yourself.

Dos And Don'ts While Building Rs. 10 Crore Corpus

When approaching long-term wealth building, many investors tend to miss out or even ignore some essential elements.

The first area relates to the instruments that one should be investing in. Since 40-year old Karthik has a tight 20-year runway, the choice of assets and funds will be more geared towards carving an aggressive portfolio of at least 80% of the money going into equities.

While this 80% allocation to equity would attract a decent level of volatility in the portfolio, it is also the most tried and tested approach to achieving a 12% or more return on investment. It is also essential to keep this portfolio away from speculative asset classes like cryptocurrencies which have shown periods of spectacular gains and unbearable losses.

The second element you need to consider in the planning process is that as your corpus comes closer to your Rs. 10 crore goal, you will be prudent in shifting a large part of the corpus from equities to fixed-income instruments.

In the above examples, a 12% yearly return has been taken throughout the illustrations. But a better way of making this plan would have been to aim for 13% for the first 17 years and then temper down the expected returns in the last three years to a much lower rate of 7% or 8%.

The calculator we have provided does give you a provision for inputting a different expected return for the first 17 years and a different expectation for the last 3 years. So, do check various combinations like 13%-7%, 14%-6%, and so on.

The third major element that you need to consider is that we have not factored inflation or taxes anywhere in these simulations. And the reason for not having that in this blog was to keep the planning process as simple as possible.

However, if you are keen on incorporating those factors, then remember the long-term capital gain is 10%, and for inflation, you can use 6%.

Bottom Line

To sum up, the entire focus of this blog is to give you investment plans and strategies that will help you build a sizable corpus in the long run. The Rs. 10 crore amount was taken as a proxy. Suppose you want to create a plan for a different number like Rs. 5 crore, Rs. 15 crore, or any other number for that matter. In that case, you can easily create an investment plan using the same investment ideas mentioned in this blog: Start with a significant lump sum investment and then continue your SIP investments in a disciplined manner.

How to Make 50 Crores in 10 Years

Source: https://www.etmoney.com/blog/how-to-make-rs-10-crore-in-20-years/

0 Response to "How to Make 50 Crores in 10 Years"

Post a Comment

Iklan Atas Artikel

Iklan Tengah Artikel 1

Iklan Tengah Artikel 2

Iklan Bawah Artikel