How to become a crorepati?
Becoming a CROREPATI on a normal income is possible, but it is dependent upon 3 things:
- The Amount Invested Every Month/Year
- Rate Of Return
- Time Period The Amount Stays Invested
A disciplined approach towards saving and sensible investing choices will take you to your first crore as long as you allow COMPOUNDING to do its magic.
If you were to save and invest Rs 50,000 per year (which is slightly more than Rs 4,000 per month) you could become a crorepati in 25 years.Here is a calculator where you can put your own numbers to see how many years you need to reach your target.
Let us now take a closer look at the factors which make this happen:
1. Amount Invested Every Month/Year:
It's intuitive that the more you are able to save and invest today, the larger your reward will be down the road. However, this table shows that even the smallest addition to your savings each year can make a big difference in reaching your targeted amount.
|Amount invested per year (assumed rate of return 12%)||Total investment||Value after 25 years|
|Rs 10,000||Rs 3,00,000||Rs 29,41,000|
|Rs 11,000||Rs 3,30,000||Rs 32,35,000|
|Rs 15,000||Rs 4,50,000||Rs 44,12,000|
|Rs 25,000||Rs 7,50,000||Rs 73,53,000|
|Rs 50,000||Rs 15,00,000||Rs 1,47,00,000|
|Rs 1,00,000||Rs 30,00,000||Rs 2,94,00,000|
2. Rate Of Return:
The rate of return (the amount you earn on your savings) has a huge impact on the amount of money you'll end up with. Different investment vehicles have different expected returns. For example, Indian stocks have historically returned more than 15% per year. Cash, in contrast, has a current return of 8-9% per year.
Your goal is to find a rate of return that offers the highest potential for growth, but at the lowest possible potential for risk of loss. Over time, we have found that the most prudent solution is a diversified combination of investment assets (stocks, bonds, cash, real estate, and alternative investments).
Assuming that you could invest Rs 100 at 11% per year, you would have Rs 1,359 at the end of 25 years. However, if you were able to invest Rs 100 at 15% per year, you would have Rs 3,292 at the end of 25 years.
|0||Rs. 100||Rs. 100||Rs. 100|
3. Time Period Amount Stays Invested:
To illustrate the power of compounding over time, please refer to the tables below. In the first example, Rs 2,000 were saved and invested each year from age 19 to 26 (for a total of 8 contributions). In the second example, Rs 2,000 were saved and invested each year from age 27 to 65 (for a total of 39 contributions). At age 65, the first example ended up with Rs 1,019,161 (vs. Rs 805,185 in the second example), even though the total amount contributed over the 8 year period was only Rs 16,000. The reason? The first example had 8 more critical years to invest at the same rate of return at the beginning of the investment period. That's the power of compounding!
| ||Example 1: || ||Example 2: || |
|Age ||Annual Investment ||Year-End Value ||Annual Investment ||Year-End Value |
|19||Rs. 2,000||Rs.2,200||Rs. 0||Rs. 0|
|20||Rs. 2,000||Rs.4,620||Rs. 0||Rs. 0|
|21||Rs. 2,000||Rs.7,282||Rs. 0||Rs. 0|
|22||Rs. 2,000||Rs.10,210||Rs. 0||Rs. 0|
|23||Rs. 2,000||Rs.13,431||Rs. 0||Rs. 0|
|24||Rs. 2,000||Rs. 16,974||Rs. 0||Rs. 0|
|25||Rs. 2,000||Rs. 20,872||Rs. 0||Rs. 0|
|26||Rs. 2,000||Rs. 25,159||Rs. 0||Rs. 0|
|27||Rs. 0||Rs. 27,675||Rs.2,000||Rs.2,200|
|28||Rs. 0||Rs. 30,442||Rs.2,000||Rs.4,620|
|Less Rs. invested || ||(Rs.16,000)|| ||(Rs.78,000)|
| || ||Rs.1,019,161 || ||Rs.805,185 |
|Money increased || ||64 fold || ||10 fold |
The idea is very simple. The earlier you start saving and investing, the more money you'll end up with. By saving smaller, regular amounts over longer periods of time, you'll end up with more than if you had saved larger amounts over a shorter period of time.
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Last post 02-11-2013 1:08 AM by priyac21
Reply to Thread
01-08-2013 10:55 PM
What do you think about this topic? Let us know and don't feel shy!
- Joined on 08-11-2010
- Posts 1
- Points 20
Really I like the way, this site has developed. Honestly, there are many websites which are keen in promoting insurance policies only.
I need an financial advisor to give me correct direction to make a crore.
Let me know!
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