People with modest incomes can build a crore-worthy portfolio by investing small amounts consistently, says Ramalingam Kalirajan, and shows how the magic of compounding works.
In a world where social media is flooded with videos promising 'easy ways to become a millionaire,' it's easy to feel overwhelmed.
Many of these videos suggest investing Rs 50,000 or even Rs 60,000 per month and showcase lofty returns of 15% per annum. But are these claims realistic for everyone?
The truth is, while high-income earners might afford such large monthly investments, people with modest incomes can also build a crore-worthy portfolio by investing small amounts consistently in the right financial instruments over time.
So how much do you really need to invest, and where should you invest to reach that first crucial Rs 1 crore milestone?
Why the First Rs 1 Crore Matters So Much
For most investors, the first Rs 1 crore is the hardest to accumulate.
But once you achieve that, the path to subsequent crores gets exponentially easier due to the power of compounding.
Let's explore this with a simple example:
If you invest in a scheme that gives 8% annual returns, to accumulate Rs 1 crore:
- In 5 years: invest Rs 135,196/month
- In 10 years: Rs 54,299/month
- In 15 years: Rs 29,431/month
- In 20 years: Rs 16,865/month
- In 25 years: Rs 10,445/month
If you invest in a scheme that gives 12% annual returns, to accumulate Rs 1 crore::
- In 5 years: Rs 121,232/month
- In 10 years: Rs 43,041/month
- In 15 years: Rs 21,011/month
- In 20 years: Rs 10,009/month
- In 25 years: Rs 5,270/month
If you invest in a scheme that gives 15% annual returns, to accumulate Rs 1 crore::
- In 5 years: Rs 111,505/month
- In 10 years: Rs 35,886/month
- In 15 years: Rs 16,224/month
- In 20 years: Rs 6,597/month
- In 25 years: Rs 3,045/month
This demonstrates a clear insight: the higher the return potential of your investment, the lesser you need to invest monthly to reach Rs 1 crore.
Where Should You Invest?
If you're aiming for long-term growth to reach your first Rs 1 crore corpus, choose equity mutual funds for potentially 12% to 15% annual returns.
Investors with a lower risk appetite can opt for hybrid mutual funds or multi-asset funds which balance equity, debt, and gold.
If you're conservative and want guaranteed returns:
You can consider PPF, Kisan Vikas Patra, RDs, FDs, or debt mutual funds, but be prepared to invest a much higher amount to reach your target.
If your investment horizon exceeds 7 years, wouldn't equity funds be the smarter choice? They have the potential to outpace inflation and create real wealth over time.
Fixed-income options may feel safer -- but is safety truly valuable if your purchasing power steadily declines? Inflation compounds too, and failing to factor it in could silently and significantly erode your wealth.
The Magic of Compounding: Beyond the First Crore
Once you reach your first Rs 1 crore, compounding takes over and does the heavy lifting. Let's assume you get compounded growth of 12% annually after hitting Rs 1 crore:
- Rs 1 Cr to Rs 2 Cr: ~6 years
- Rs 2 Cr to Rs 3 Cr: ~3.5 years
- Rs 3 Cr to Rs 4 Cr: ~2.5 years
- Rs 4 Cr to Rs 5 Cr: ~2 years
- Rs 5 Cr to Rs 6 Cr: ~1.5 years
And so on...
Even if you stop investing after the first Rs 1 crore, your corpus can grow significantly if left untouched.
For instance, starting at age 30 and investing Rs 15,000/month for 15 years at 15% annual return will give you Rs 1 crore by age 45.
If you stop investing then, that corpus can grow to Rs 8 crores by age 60 without any additional investments!
Conclusion: Invest Smart, Start Early
Your first Rs 1 crore should be through financial investments -- not physical assets like real estate.
Why? Because financial instruments offer liquidity, flexibility, and consistent compounding.
Don't wait for a windfall or a salary hike. Start today, even if it's just Rs 5,000/month.
The sooner you start; the more time compounding gets to work its magic.
Reaching your first Rs 1 crore isn't just a financial milestone; it's the beginning of your journey to true financial freedom.
Ramalingam Kalirajan, an MBA in finance, is a certified financial planner. He is the director and chief financial planner at Holistic Investment Planners, a leading financial planning and wealth management company.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
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