“Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.” — Charlie Munger
Having 1 crore rupee (10 million for those outside India) is a nice sum of money. It embeds a sense of security in our mind. Many of our financial goals are linked to this alluring pot of money. Probably kids in 20s might think it’s a tiny sum of money, but it certainly is a popular financial goal for many. Creating a decent corpus requires:
- Saving some money every month from your regular income.
- Investing your money prudently in a tax efficient manner. Asset allocation is important and hence choose instruments that suit the investment time horizon and risk appetite. Longer the investment horizon, better is to go with equity mutual funds.
- Invest regularly, invest systematically and invest for long-term to get the benefit of compounding.
So, here I am going to discuss how much you need to invest to accumulate 1 crore through SIPs. In addition, I will discuss:
- 1 crore today is much more than 1 crore in 10 years as inflation reduces the purchasing power of money.
- How much to invest to get 1 crore after certain period of time?
What will be the value of 1 crore in future?
Here I show how inflation eats away the value of money. At 6% inflation, every 5 years the value of money declines by 25% of the original value.
Alternatively, if you need 1 crore today, you should aim for 33% (1/0.75 =1.33x or 33% more) more after 5 years to maintain its purchasing power.
How much you need to invest to accumulate 1 crore?
In the below table, we show how much needs to be invested to accumulate 1 crore through SIP after a certain period of time for a given level of return.
For example, if you want to accumulate 1 crore through SIP after 10 years, below is what you need to invest every month.
How much you need to invest to accumulate inflation adjusted 1 crore?
As you saw above, how the value of 1 crore declines due to inflation impact (INFLATION-Ignore at your own peril!). If you want to invest to get 1 crore through SIP after adjusting for inflation, below is how much SIP amount will be needed. We also show the corpus size that will be needed to account for inflation impact.
Finally, creating 1 crore corpus is a matter of discipline and prudent investment choices. Remember, nothing is impossible for the disciplined investor. What is extremely important is choosing the right investment vehicle to realize your investment goal. If you choose the wrong instrument (fixed deposit) for long-term goals (10 years or more), you will need to put in substantially more amount per month to accumulate the same corpus. Proper asset allocation is key to achieve your financial goals.
Disclaimer: The above content is just for information and should not be construed as an offer to buy or sell or recommendation. Contact your financial advisor for guidance on any investment related query.
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