Can I build a 2 crore corpus with a 1 lakh salary and 45,000 EMI?

Hello sir , I want to.make corpus of 2Crores my salary is 1lakh and have a all emi of rs 45000 per month, I request you to kindly give me plan for for the best investment for next 10 to 15 years

Ans: Given your salary and current financial commitments, we can create a structured and balanced investment strategy.

Current Financial Snapshot
Monthly Salary: Rs. 1 lakh.

EMI Commitments: Rs. 45,000 per month.

Available for Investment: Rs. 55,000 per month.

Your goal is to build a corpus of Rs. 2 crores in 10 to 15 years. Let's break this down into actionable steps.

Savings and Budgeting
First, ensure a disciplined approach to saving and investing:

Emergency Fund: Set aside 6 months of expenses in a savings account or liquid fund.

Monthly Savings Goal: Allocate Rs. 55,000 for investments consistently.

Investment Strategy
To achieve your target, a diversified and balanced investment portfolio is essential:

Equity Mutual Funds
High Returns Potential: Equity mutual funds can offer high returns over the long term.

Actively Managed Funds: Opt for actively managed funds to potentially outperform the market.

Systematic Investment Plan (SIP): Start SIPs with a significant portion of your monthly savings.

Debt Funds
Stability and Low Risk: Debt funds provide stability and lower risk compared to equity.

Balanced Approach: Allocate a portion of your savings to debt funds for a balanced portfolio.

Systematic Investment Plan (SIP): Consider SIPs in debt funds to maintain consistent investments.

Hybrid Funds
Mix of Equity and Debt: Hybrid funds offer a balance of growth and stability.

Medium Risk: Suitable for moderate risk appetite.

Systematic Investment Plan (SIP): Start SIPs in hybrid funds to diversify your investments.

Tax Planning
Optimize your investments to minimize tax liabilities:

Tax-Saving Instruments: Use instruments like ELSS for tax benefits under Section 80C.

Diversify Investments: Spread investments across different instruments for tax efficiency.

Regular Portfolio Review
Monitoring and adjusting your portfolio is crucial:

Periodic Review: Review your portfolio with a Certified Financial Planner every 6 months.

Rebalancing: Adjust asset allocation based on market performance and financial goals.

Risk Management
Ensure adequate risk management for financial security:

Health Insurance: Maintain comprehensive health insurance coverage.

Life Insurance: If you have dependents, secure life insurance for their financial protection.

Investment Discipline
Maintaining discipline is key to reaching your goal:

Consistent Investments: Stick to your investment plan without interruption.

Avoid Timing the Market: Focus on long-term growth rather than short-term gains.

Stay Informed: Keep yourself updated on market trends and investment options.

Final Insights
To achieve a corpus of Rs. 2 crores in 10 to 15 years, follow a disciplined investment strategy. Save and invest Rs. 55,000 monthly in a mix of equity, debt, and hybrid funds. Optimize your investments for tax efficiency. Regularly review and rebalance your portfolio. Ensure adequate risk management through insurance.

You are on the right track with a clear goal. Stay focused, disciplined, and regularly consult with a Certified Financial Planner to adjust your strategy as needed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: It’s commendable that you have set a bold financial goal and are ready to invest Rs 2 lakh every month. However, expecting Rs 15 crore in just 7 years with Rs 2 lakh SIP is, in most cases, an overly optimistic target. Let’s break this down further and explore a more realistic timeline while also allowing for wealth compounding to work in your favor.

Assessing the Return Expectations

For your investment to grow to Rs 15 crore in 7 years, the returns needed would be abnormally high. Even aggressive equity mutual funds, which historically provide the highest returns, may not deliver the required returns in such a short time frame.

A typical equity mutual fund may offer returns between 12-15% annually over the long term.

At these realistic growth rates, achieving Rs 15 crore in 7 years will be quite difficult.

To reach Rs 15 crore with a Rs 2 lakh monthly SIP in 7 years, you would need an extraordinary annual return of around 40-45%, which is highly improbable with traditional investment options.

How Compounding Needs Time to Work

The power of compounding plays a significant role in wealth creation, but it needs more time to show its true potential. Compounding works best over longer periods, especially beyond 10-15 years.

With 7 years, you are giving your investments a relatively short time frame, which limits the full benefit of compounding.

To fully realize the benefits of compounding, it is advisable to allow your investments more time to grow beyond 7 years.

By extending your investment horizon, you can allow your wealth to multiply at a more sustainable rate without relying on extremely high and unrealistic returns.

Extending the Investment Horizon for Better Growth

The key to reaching Rs 15 crore is to give your investments more time. By extending your horizon to 10 or even 15 years, you increase the likelihood of reaching your goal.

A Rs 2 lakh SIP in actively managed equity mutual funds with an average return of 12-15% could realistically reach Rs 8-10 crore in 10 years.

By allowing another 5 years of growth, compounding can work its magic, pushing your corpus closer to Rs 15 crore.

This extended timeline reduces the pressure to seek unrealistically high returns and makes the journey more achievable.

Recommended Strategy to Reach Rs 15 Crore

Rather than expecting Rs 15 crore in just 7 years, let’s develop a more practical strategy by extending your investment period and focusing on compounding growth.

1. Continue Rs 2 Lakh Monthly SIP for 7 Years

For the next 7 years, continue your commitment to investing Rs 2 lakh per month. This consistency is key to building wealth. However, instead of expecting Rs 15 crore by the end of 7 years, aim for a more reasonable corpus, which could be around Rs 3-4 crore at the end of 7 years, assuming returns of 12-15%.

Stick to SIPs in diversified equity mutual funds that focus on large-cap, multi-cap, and sectoral funds.

Actively managed funds provide better growth potential than passive index funds, especially in a medium-term horizon like this.

Keep reviewing your portfolio every year to ensure that it’s aligned with your financial goals.

2. Let Your Wealth Compound for an Additional 5-10 Years

Once you have built a sizable corpus after 7 years, the key is to let that money continue growing. Compounding will accelerate your wealth growth over time if you allow it to work longer.

Instead of withdrawing your corpus after 7 years, allow your investment to compound further for another 5-10 years.

Even if you stop contributing Rs 2 lakh after 7 years, the wealth you’ve accumulated will continue to grow due to compounding.

In the next 5-7 years, the compounded returns can take your corpus from Rs 3-4 crore to potentially Rs 10-12 crore.

3. Increase SIP Contributions After 7 Years If Possible

If your financial situation allows, you could further boost your investment by increasing the SIP contributions after 7 years. As your income and financial capacity grow, allocating a higher amount for investment will speed up the wealth accumulation process.

After 7 years, you could increase your SIP from Rs 2 lakh to Rs 3 lakh or more to accelerate the journey to Rs 15 crore.

By increasing your contribution and letting compounding work over a longer period, your target of Rs 15 crore becomes more achievable within the next 5-10 years.

4. Maintain a Balanced Portfolio for the Long Term

As you approach the 7-year mark, it’s essential to start balancing your portfolio to reduce risk. Shifting a portion of your funds to safer, more stable investments like debt funds or hybrid funds can safeguard the wealth you’ve built.

Continue to keep a significant portion of your portfolio in equities to benefit from long-term growth.

Gradually increase your allocation to debt or hybrid funds for stability, especially when you are within 5-10 years of your target.

A balanced approach will help you avoid large market corrections that could affect your corpus in later years.

5. Don’t Rely on Unrealistic Returns

It’s important to have realistic return expectations. Equity markets have historically delivered between 12-15% returns annually, and banking on anything higher can be risky.

Keep your expectations aligned with market realities.

By extending your horizon and allowing for compounding, you don’t need to chase extremely high returns to meet your goal.

Stick to equity mutual funds with strong historical performance and diversified portfolios.

Why Trying to Achieve Rs 15 Crore in 7 Years is Unrealistic

To understand why Rs 15 crore in 7 years is not realistic, let’s consider a few key points:

Even with aggressive growth, equity mutual funds typically provide 12-15% annual returns, far lower than what is required to meet this goal.

Achieving Rs 15 crore in 7 years would require an annual return of over 40%, which is not feasible in the long run.

Attempting to chase such high returns could lead you into risky and speculative investments that may result in capital losses.

A balanced and long-term approach is always better for achieving high financial goals like Rs 15 crore.

The Importance of Patience in Wealth Creation

Building Rs 15 crore requires patience and time. Compounding rewards those who invest regularly and leave their money untouched for long periods.

The longer you stay invested, the more compounding will work in your favor.

Stay disciplined and avoid the temptation to withdraw your funds prematurely.

Market volatility may occur, but staying invested through ups and downs is crucial for long-term success.

Final Insights

Achieving Rs 15 crore is a significant financial goal. While it may not be realistic to expect this in just 7 years with Rs 2 lakh SIPs, you can certainly reach it by allowing more time for your wealth to compound. Extending your investment horizon to 10-15 years, while continuing your SIPs, will give you the best chance of success.

Be patient and let compounding work for you over the long term.

Continue investing Rs 2 lakh per month for 7 years, and allow the corpus to grow further beyond this time frame.

Regularly review and adjust your portfolio to stay aligned with your financial goals.

Don’t rely on speculative returns—stick to a balanced and diversified portfolio to achieve steady growth.

By following these strategies and giving yourself more time, your target of Rs 15 crore can become a reality without taking excessive risks.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment