User Question: I want to retire early and my financial goal is to have 1 Crore in my bank account. I am ready to invest 8 to 10 lakhs now and can I get 1 Cr in 10 years?
Question: I want to retire early and my financial goal is to have 1 Crore in my bank account. I am ready to invest 8 to 10 lakhs now and can I get 1 Cr in 10 years?
Is my goal achievable? If not in 10 years, what time frame is needed for my investment to reach 1 Crore?
Answer: Your goal is definitely achievable but the process you have in mind needs tweaking because you have opted for a tough roadmap. The roadmap is tough for a couple of reason and let me share those with you first.
1. Asking for better than average returns for an elongated period of time.
The first and the most important reason your investment roadmap is tough as you want your money to become 10 times in 10 years which means you want an average of 25%+ as your return on investment.
Quite tough to achieve for such an elongated period of time. Market can be volatile and it is better to be assuming average return from the equity market which has been around 15% for longer terms.
2. Only opting for lumpsum investment
The second reason is, you have accumulated quite a good amount of money for investment and I am sure this money has not been accumulated overnight. So it would have been even better if you had started a SIP investment instead of starting a lumpsum investment.
Better late than never and you still have quite a good chance of making to that magical figure of 1 Crore in the next decade or so.
The right roadmap to 1 Crore in 10 years.
The right roadmap for any investment is always to start SIP.
Try to invest at least 25 to 30 percent of your total earnings per month as SIP in an equity mutual fund. If you are making around 1 lakh, try to invest 25 to 30 thousand Rs per month in SIP. As your income grows over time, your investment in SIP should grow as well.
For your lumpsum investment, start with 10 to 20% of your investment in the market now. Then invest 10% in every 10% dip in the market from the peak. Assuming you want to be investing 10 lakhs, start by investing only 1 to 2 lakh in the market now and keep track of the market. Once index corrects 10% from its peak, invest the next 10% and so on.
So if Nifty is around 8000, you should invest 10% once you see a correction of around 10% which is around 7200, invest the next 1 lakh. After the correction, let’s say the market is back to around 7700. If again there is a correction of 10% from its peak, invest the next 10% as a lumpsum investment. This has proved to be quite safe way (though not the best way) to invest lumpsum amount in the market for better than average returns.
What should be the right timeframe to get to Rs 1 Crore for a lumpsum investment of Rs 10 lakh now?
There is an additional question which is if he cannot achieve 1 Crore in 10 years, what should be the right timeframe to make that happen.
Assuming the average return from the equity market for an elongated period of time has been around 15%, you will need at least 16 years to get your 10 lakh Rs to reach 1 Crore.
Final Thoughts
1 crore as a retirement corpus by investing only in the market may not be a good choice from a diversification point of view. If you have lumpsum amount to invest now, you can also opt for investing in a commercial property that can fetch you a rent. Opt for a SIP in market from the rent you receive.
Dear Shabbir Bhai…
Seems we have tremendous connection/telepathy though we don’t communicate daily.
Almost all your mails were an answer to my ongoing churning questions.
Like today’s Roadmap… Searching seriously since few months A decent way to earn around 40-50K/month (Including EMI & Yr. insurance amount) so that I can think of Retirement (From Daily Office) early. My Pending Loan amount is around 18L.
I am not money minded & don’t wish to waste my whole life behind it. But would like to earn for Roti/Kapada/Makan & Medical expenses. I love to travel & love to be in peace. So “Work for Home” would be really nice option. Would be grateful to you if you could suggest such opportunities.
Thanks & Regards,
Kedar N
Wow. I am glad the timing of my posts are exactly what you are looking for but if they are not inline with what you are looking for, don’t hesitate to drop me a question.
Kedar, look for investing in your loan thick and fast and that is the fastest path to even thinking about retirement. Read – http://shabbir.in/factors-to-consider-before-investing/
Hi Shabbir,
Thanks for the post. I was about to ask a similar question.
I have jumped into a business after 10 years in IT industry. My problem is as my business is yet to stabilized, my income also fluctuates widely. On average I make around 30K per month from my business. my wife also earns around 15k.
Apart from that I have 2 apartments on rent and it fetches me around 50k in rental income. My parents were with SBI and both of them has retired now. They are gradually transferring all their money to my name. So, I am in the process of inheriting a large amount of money.
Now my financial goals are as follows.
Short term (in next 3-5 years)
Apart from those 2 apartments, I also own a plot of land where we are currently living. The house we are living in around 25years old and covers only around 30% of the plot. I am planning to build a multi-storied building that covers the entire plot.
This will multiply my rental income many fold. I am planning to use the money I will inherit for this purpose.
This is the right way or should I apply for a home loan?
Medium term (5-10 years)
To provide for my daughter’s education and be ready for any eventuality like medical expenses. I think, I can take care of this from my monthly income.
Long term
Daughter’s marriage, retirement saving
Now this is the tricky area. Please advice where do I invest to achieve these 2 goals?
Utpal,
You are about to inherit quite a good sum of money and so I would definitely not opt for loan.
Second you have a business where your income is quite low and so investing in business can be something I would definitely look into as well depending on the business specifics though.
Apart from that you have too much investments in property and that can be good as well but then it is also better to be diversifying and so my suggestion would be to invest in SIP major chunk of your rental income. May be 60% of your rental income can go into mutual fund sips for both the investment plans. 3 to 4 funds with 8 to 10k in each of those funds.