Investment Planning for a bright Future–

Equity MFs are still the best option to become a crorepathi: See how it works:

There is saying in English which goes like this: “If you fail to plan, you are (surely) planning to fail” Yes, this adage is quite apt for any aspect of our life- Health, Education, marriage et al: For anything you need to have a perspective financial planning

Let us check out how much time it will take to accumulate a corpus of Rs 1 crore if you invest Rs 10,000 every month in popular investment schemes like PPF, mutual fund and NPS. Although the investors have a range of investment options like Post office deposits, Bank deposits, PPF, NPS, LIC etc., the discernible investors find it difficult to choose the right investment wherein ROI is reasonable, sustainable and above inflation. With the increase in cost of living which goes up automatically every year @ 10 % at least, the smart investors should enhance their income at least over 10 % to maintain the same quality of life. As age advances the ability to earn active income by way of salary, business etc., diminishes and as such, Investors should consciously develop a financial strategy to earn passive income which adds to the kitty-like interest income, rent, pension, dividend  etc.,

KEY HIGHLIGHTS

• Systematic investment over a long period of time can easily make you a crorepati as the power of compounding plays a big role in multiplying your wealth
• Anyone who invests regularly can easily become a crorepati within 20 years.
• The average return of NPS funds over the last 10 years has been around 10%

With interest rate declining steadily in the economy, it is going to take more time for savers to accumulate a corpus of Rs 1 crore. As soon as people start earning they aim to accumulate a corpus of Rs 1 crore in the lowest possible time. Those who have just started working don’t have a large amount for lump sum investment, aim to become a crorepati by saving a fixed amount every month. Worth mentioning here is that anyone who invests regularly can easily become a crorepati within 20 years. Systematic investment over a long period of time can easily make you a crorepati as the power of compounding plays a big role in multiplying your wealth.

Let us check out how much time it will take to accumulate a corpus of Rs 1 crore if you invest Rs 10,000 every month in popular investment schemes like Public Provident Fund (PPF), National Pension Scheme (NPS) and equity mutual funds (MF).

Public Provident Fund (PPF): Crorepathi in 28 years.

PPF is the most popular long term saving instrument as it provides tax-free returns. Also, the amount you invest every year in PPF qualifies for tax benefit under Section 80C. But in the new tax regime, the benefits of Section 80C are not available. A PPF account can be opened in a bank or in a post office. Unlike RDs, interest rate of PPF is the same across banks and post offices as it is decided by the government every quarter.

Assuming that the current PPF interest of 7.1% remains constant throughout the investment period, you may accumulate Rs 1 crore in 28 years by investing Rs 10,000 at the beginning of every month. Worth mentioning here is out of the Rs 1.054 crore that you will accumulate through PPF in 28 years, around 72% come as interest and you invest only Rs 33.60 lakh over the  28 years.

National Pension Scheme (NPS): Crore pathi in 23 years.

Of late NPS has gained popularity as a retirement saving instrument. Earlier it was opened to government employees only but since 2009 it is open to all. You can either invest a lump sum or fixed amount every month in NPS.

The average return of NPS funds over the last 10 years has been around 10% if you allocate 50% of your NPS contribution to equities and 50% to government securities. Assuming long-term compound annual growth rate (CAGR) of 10%, you may accumulate Rs 1 crore in 23 years by investing Rs 10,000 in NPS at the beginning of every month.

Mutual Fund (MF):  Rs 1 Crore in just 20 years:

Equity mutual funds are considered as the best instrument to create wealth faster if you can bear with volatility.  For risk-averse investors, index funds are best suited as they are less volatile and offer attractive return in the long term. You can invest in index funds that track either Nifty or Sensex. After the recent correction in equity markets post the outbreak of Covid-19 pandemic, equity funds look attractive for long term investment. These funds have the potential to offer as around 12% CAGR over the long term.

Assuming long-term CAGR of 12%, you may accumulate Rs 1 crore in 20 years by investing Rs 10,000 at the beginning of every month. You can achieve this goal even faster if you use SIP top-up. If you increase your monthly SIP of Rs 10,000 every year by 10% then you will be able to accumulate Rs 1 crore corpus in 16 years assuming a CAGR of 12%

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