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Can I build a 5 crore corpus in 10 years with a 60k salary?

Ramalingam Kalirajan |7407 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 30, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Dec 29, 2024Hindi

Im 30 with salary 60k Monthly expense - 20k Pf - 15 lac No EMI , No Loan Want a corpus on 5cr in 10 yr , is it possible Please guide

Ans: You aspire to build a corpus of Rs. 5 crores in 10 years. This goal is ambitious but achievable with disciplined planning. Your current monthly income is Rs. 60,000, expenses are Rs. 20,000, and you have a PF corpus of Rs. 15 lakhs. You have no loans or EMIs, which is excellent for financial stability.

Let us analyse and create a structured approach to achieving your goal.

Financial Assessment
Surplus Availability:
With a monthly expense of Rs. 20,000, you can save Rs. 40,000 each month.

Existing PF Corpus:
Your PF corpus of Rs. 15 lakhs is a strong foundation.

Goal Feasibility:
To accumulate Rs. 5 crores, consistent savings and investments are necessary.

Recommended Investment Approach
1. Equity Mutual Funds
Equity mutual funds are a suitable option for long-term wealth creation.
These funds historically offer returns that beat inflation and create wealth.
Investing Rs. 40,000 monthly in equity mutual funds can help you reach your target.
Opt for a mix of large-cap, mid-cap, and small-cap funds for diversification.
2. Tax-Efficient Planning
Equity mutual funds attract a 12.5% tax on LTCG above Rs. 1.25 lakh annually.
Plan withdrawals smartly to minimise tax liabilities.
Review your investments yearly to adjust as needed.
3. Balanced Risk
Allocate 70% of your portfolio to equity for growth.
Keep 30% in debt instruments like PPF or debt mutual funds for stability.
Steps to Implement
1. Automate Investments
Set up a SIP (Systematic Investment Plan) for Rs. 40,000 monthly.
Automating ensures discipline and reduces the risk of missing investments.
2. Periodic Portfolio Review
Review your portfolio every 6-12 months with a Certified Financial Planner.
Adjust fund allocation based on performance and market conditions.
3. Avoid Low-Yield Instruments
Avoid FDs and other low-return investments for long-term goals.
These instruments often fail to beat inflation.
Building Discipline
1. Emergency Fund
Maintain 6-12 months of expenses (Rs. 1.2-2.4 lakhs) as an emergency fund.
Park this amount in a liquid mutual fund for easy access.
2. Continue PF Contributions
Let your PF contributions grow.
It offers tax benefits and risk-free compounding returns.
3. Avoid Unnecessary Expenses
Stick to your current expense structure.
Avoid lifestyle inflation, which can eat into your savings.
Alternative Investment Options
1. Debt Mutual Funds
Invest a smaller portion in debt mutual funds for stability.
Debt funds suit short-term needs or as a safety net.
2. PPF Contributions
Max out your PPF contributions annually (Rs. 1.5 lakhs).
It offers tax-free returns and complements your equity investments.
3. Gold
Allocate 5-10% to gold ETFs or sovereign gold bonds.
It provides diversification and acts as a hedge against inflation.
Insights on Actively Managed Funds
Why Prefer Actively Managed Funds?
Actively managed funds are better for creating wealth in India’s dynamic market.
They adapt to market changes, unlike index funds.
Experienced fund managers aim for higher returns through stock selection.
Drawbacks of Direct Mutual Funds
Direct funds lack professional guidance, which may lead to mistakes.
Regular funds, managed through a Certified Financial Planner, add value.
They provide ongoing monitoring, advice, and goal tracking.
Risk Management
1. Health Insurance
Ensure adequate health coverage for yourself and dependents.
A Rs. 10-15 lakh family floater policy is ideal.
2. Life Insurance
If you don’t have term insurance, consider a policy of Rs. 1 crore.
It ensures your family’s financial security in your absence.
3. Diversification
Do not over-allocate to any single asset class.
Diversification reduces risk and improves returns.
Adjusting for Inflation
Inflation reduces the real value of money.
Your investments must grow faster than inflation.
Equity mutual funds help counter inflation effectively.
Final Insights
Achieving Rs. 5 crores in 10 years requires focused efforts. Your high savings rate and lack of liabilities work in your favour. By investing in a mix of equity and debt mutual funds, maintaining discipline, and periodically reviewing your progress, your goal is achievable.

Ensure your investments align with your risk tolerance and financial goals. Take guidance from a Certified Financial Planner for a customised approach.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.