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.
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.