Becoming a Crorepati, not a distant dream anymore!

Who wouldn’t want to become rich? But is it possible to accumulate crores from a salary of 20-25 thousand rupees? Well, it’s not easy. But if you invest regularly for a long time, becoming a crorepati is possible. Suppose you want to accumulate one crore rupees. What do you need to do? Where and how much should you invest? Let’s find out.

Whenever it’s about personal finance, i.e., money, it is always advised to set clear goals first. In this case, it’s clear that we want one crore rupees. Now it’s time to choose the right product to achieve the goal of one crore rupees.

Broadly, there are two options for investment. First – equity, and second – debt investments. Debt investment is low risk with low returns. It includes debt mutual funds, bonds, bank FDs, and government small savings schemes. Equity investments involve shares, equity mutual funds, and products related to the stock market. While equity is considered riskier, it has the potential to provide higher returns over the long term.

SIP for long term-higher returns

For accumulating a large sum like one crore, investing through SIP (Systematic Investment Plan) in equity mutual funds is a better route. SIP, which stands for Systematic Investment Plan, is a way to invest in mutual funds where you invest a fixed amount regularly, typically every month, in a mutual fund scheme. Even though the SIP amount may be small, the power of compounding and rupee-cost averaging helps accumulate a large amount over the long term.

For example, if your salary is Rs. 20,000, practically speaking, you may not be able to allocate a significant portion of it, let’s say Rs. 10,000 or Rs. 15,000, towards SIPs. However, you can allocate 20-25% of your salary, which amounts to Rs. 4,000-5,000. Since you are making a smaller investment, it will take more time to achieve your financial goal.

For instance, if you start a SIP of Rs. 5,000 in an equity mutual fund where you expect an annual return of 12%, it would take approximately 26 years to accumulate one crore rupees. If you want to accumulate one crore rupees in 24 years, you would need to do a SIP of Rs. 6,000, which is 30% of your salary.

How to Step Up your SIP?

The more you invest, the sooner you can achieve the goal of becoming a crorepati. This is where the concept of plain SIP comes into play. It’s not feasible for those with lower salaries to invest a large amount at once. In such cases, you can make your SIP smart by choosing an option like Step Up SIP or Top Up SIP and achieve your dream of becoming a crorepati sooner. Let’s understand the connection between Step Up SIP and salary.

Today your salary is Rs. 20,000. You will get a yearly increment or change jobs, resulting in an increase in salary. With an increase in salary, you need to step up your SIP, i.e., increase it.

According to the Step Up Calculator, if you start a SIP with Rs. 5,000 and apply an annual step-up of 10%, i.e., increase the SIP amount by 10% every year, with an estimated return of 12%, you can accumulate approximately one crore rupees in 20 years.

If you apply an annual step-up of 20% instead of 10%, you can reduce the time to accumulate one crore rupees to around 16 years. That’s the benefit of Step Up!

When starting a SIP, you can choose the Step Up option. You can increase the SIP amount by a percentage or a fixed amount every year, for example, increasing it by Rs. 1,000-2,000 annually. Apps like Groww provide the facility to convert your current SIP into a Step Up SIP.

SIP in equity mutual funds is generally considered good for long-term investment. It has provided returns ranging from 15% to 16% in the long term. Therefore, when you invest in mutual fund SIPs, do it for long term. Keep the investment going patiently for years. Don’t stop SIPs under any circumstances. Don’t withdraw your money. Follow these principles and you can achieve your target of becoming a crorepati soon!