Indian festivals are much like SIPs (Systematic Investment Plans). Just as the spectacular Diwali doesn’t erupt from one day’s preparation but is built on months of careful planning and shopping, achieving your investment goals is a journey that’s shaped by consistent monthly commitments rather than a sudden lump sum. Now, let’s examine your ambition to turn your monthly contributions into a crore.
- The Power of Compounding: The magic that can potentially turn your regular investments into a sizable corpus is the power of compounding. It works like the rapid multiplication of rabbits. Starting early, staying consistent, and allowing your investments to grow uninterrupted is essential.
- Rate of Returns Matter: Warren Buffett rightly said, “Price is what you pay. Value is what you get.” The outcome of your SIP is determined by the annualized returns. Historically, Indian equity markets have delivered 12% to 15% annual returns. But, remember, past performance is not indicative of future results. So, taking a conservative estimate at 12% for our calculations:
If you invest Rs. 5,000 per month at 12% for 25 years, you would accumulate close to Rs. 80 lakhs. If you invest Rs. 7,000 per month at 12% for 25 years, you would accumulate a little more than Rs. 1 crore.
- Roots and Wings Philosophy: To ensure the potential of such returns, it’s imperative to have a strong investment philosophy. By focusing on stocks that have both roots (strong balance sheets, top-quality management) and wings (consistent revenue and profit growth), one can aim to weather the ups and downs of the market.
- Asset Allocation via LSG Framework: Equally vital is having a judicious asset allocation. Using the LSG (liquidity-safety-growth) framework, one can allocate assets based on their risk profile. While SIPs in equity mutual funds promise growth, always ensure there’s a balance of liquidity and safety.
- Chasing Yield: It’s tempting to look only at funds that give high dividends, but remember, pure dividend-chasing may lead you astray. A healthy mix of capital appreciation and dividends, where the dividend yield lies between 1% to 1.5%, is often more sustainable.
To sum up, while turning Rs. 5k-7k monthly into a crore in 25 years is achievable with a disciplined approach and a well-thought-out strategy, it also requires patience and the will to stay the course during market volatility. Like Rakesh Jhunjhunwala, India’s ace investor, once said, “Markets test patience and reward conviction.”
If these waters seem a bit turbulent for solo sailing, consider partnering with a seasoned captain. Consider Jama Wealth’s PMS services and associate SEBI Registered Investment advisory services.
