How to make first 1 crore in 5 years| 5 years investment plan in mutual funds

Summary

In this video, financial planner Bhaven discusses strategies to achieve the goal of ₹1 crore in 5 years. He explores different investment scenarios for individuals like Karan, Sanika, Chenu, and Ramesh, each with varying risk appetites and financial situations. Bhaven emphasizes the importance of financial planning, disciplined investing, and strategic asset allocation. He highlights the power of compounding and how investing early can significantly boost wealth. The video provides practical advice on SIP, lump sum investments, and using step-up investments to reach the ₹1 crore goal, along with insights on realistic planning and market conditions.

Takeaways

• 😀 ₹1 crore is a significant financial milestone that represents achievement and stability, and it can grow through the magic of compounding.
• 😀 Achieving ₹1 crore in 5 years depends on how much wealth you already have and your risk tolerance in investments.
• 😀 The 15-15-15 rule suggests investing ₹15,000 per month at a 15% return for 15 years to reach ₹1 crore, but this may not be suitable for every market condition or investor.
• 😀 Starting early is crucial for achieving financial goals. Compounding works best over time, and the longer you invest, the greater the growth.
• 😀 Karan, with a higher risk appetite, could achieve ₹1 crore in 5 years by investing ₹88,000/month or ₹55,000/month with a 10% annual increase in investment.
• 😀 Sanika, with a low risk appetite, needs to step up her investment by 25% annually to achieve ₹1 crore in 5 years, despite a lower expected return of 11%.
• 😀 An investor's success depends on factors they can control, like increasing their investment amounts (step-ups) and maintaining discipline, rather than relying solely on market returns.
• 😀 Lump sum investments can also help reach ₹1 crore. For instance, Ramesh, a businessman, would need to invest ₹49.5 lakh upfront assuming a 15% return.
• 😀 Investors should adjust their expenses in line with salary hikes, redirecting the additional income into investments to reduce the time required to reach financial goals.
• 😀 Asset allocation should be strategic, combining equity and debt to match an investor’s risk profile. Over time, equity generally offers higher returns, but debt can reduce volatility.
• 😀 Working backward from your financial goal helps in identifying the exact monthly investments needed. Understanding the gaps in your financial planning is key to success.
• 😀 The magic of compounding allows money to double over time. With consistent SIPs and step-ups, investments can grow exponentially, even with lower risk at 12% return.

Q & A

Why is ₹1 crore considered a significant financial milestone?

₹1 crore is seen as a symbol of achievement and financial stability. It represents a point where an investor's wealth has reached a level that can generate substantial returns, offering financial security.

What is the 15-15-15 rule, and why might it not be suitable for every investor?

The 15-15-15 rule suggests investing ₹15,000 per month at a 15% return for 15 years to reach ₹1 crore. However, it assumes consistent returns, which may not always be realistic due to market volatility, making it unsuitable for all investors.

What is the importance of compounding in achieving financial goals like ₹1 crore?

Compounding is crucial because it allows your investments to grow exponentially over time. For instance, with a 12% return, an investment can double every 5 years, helping investors reach their ₹1 crore goal more quickly.

How does adjusting investments based on salary hikes contribute to achieving financial goals?

Adjusting investments with salary hikes allows investors to increase their investment amounts over time. This reduces the time needed to reach financial goals like ₹1 crore, as seen in Gopal's example, where a small increase in investment can shorten the timeline.

What are the different strategies investors can use to reach ₹1 crore in 5 years?

Investors can use strategies such as starting with high SIP amounts, increasing investments annually, or making lump sum investments based on their available funds and risk appetite. Each strategy requires careful planning and consideration of expected returns.

How does risk appetite influence the strategy to achieve ₹1 crore?

Risk appetite plays a significant role in determining investment strategy. Investors with higher risk tolerance, like Karan, may opt for higher returns through SIPs, while those with lower risk tolerance, like Sanika, may focus on smaller, incremental investments with lower risk.

What role does asset allocation play in reaching financial goals?

Strategic asset allocation helps manage risk and optimize returns. By diversifying investments across debt and equity, investors can reduce risk while targeting reasonable returns. Understanding your risk appetite is key to this strategy.

Why is it important to set clear financial goals and work backwards?

Setting clear financial goals allows investors to work backwards and calculate exactly how much they need to invest each month to reach their target. This provides a roadmap and ensures the strategy aligns with the desired outcome.

What are the potential benefits of stepping up investments each year?

Stepping up investments annually can help investors reach their goals faster. By increasing the investment amount each year, as seen in Sanika's example, investors can make up for market fluctuations and achieve their target more reliably.

How do lump sum investments compare to SIPs in achieving ₹1 crore?

Lump sum investments require a larger upfront amount but can be effective if the investor has the necessary funds. For example, Ramesh needs to invest ₹49.5 lakhs upfront to reach ₹1 crore in 5 years at a 15% return, compared to a SIP which requires smaller monthly contributions over time.