Building Rs. 5 crore wealth is a new trend

Hello,

Building Rs. 5 crores in financial assets is now a trend among many of the well-to-do families. There were always only two investments that have the potential to give a return of more than 12%:

• Real Estate

• Mutual Funds and Portfolio Management

Thank you for taking the time to read this and I hope this helps in making informed financial decisions and planning for a better future.

Why 5 crores is trending? 

Rs. 5 crores may seem like a random number, but it has some logic behind it.

First of all, it is a round figure that can be easily remembered and tracked. Second, it is a sufficient amount to meet most of your financial needs and goals, such as buying a house, funding your children’s education, taking care of your health expenses, and living a comfortable lifestyle. Third, it can also provide you with a steady income stream in your retirement years, if you invest it wisely.

According to a report by HDFC Life¹ , if you want to generate an income of Rs. 1 lakh per month for 25 years after retirement, assuming an inflation rate of 6% and a post-tax return of 8%, you will need a corpus of Rs. 4.8 crores. This means that if you have Rs. 5 crores in your kitty by 2024, you can retire peacefully without worrying about money.

Doing a detailed goal-based analysis requires a lot of work to be done from your end. More than 1000s of case studies were done by Certified Financial Planners (CFPs) and wealth outfits. From that, the common denomination was heaving a financial wealth of Rs. 5-8 crores.

We discussed this with 50+ people in our network who have already achieved this. They said, “Though 5 crore is an arbitrary number, having Rs. 5 crores in liquid assets is a relief and gives a lot of satisfaction.“ They also added “We have properties too, but those properties do not give quick exit or partial exit. Mutual Funds and Fixed Deposits give this option.”

How to achieve Rs. 5 crores?

The key to achieving any financial goal is to invest smartly. It requires concentrated investment and regular addition.

• If you can put Rs. 5 lakhs a month, you will build Rs. 5 crores in just 5 years.

• If you can put Rs. 2 lakhs a month, you will build Rs. 5 crores in 9 years.

• Invest Rs. 1 crore today and then add Rs. 1 lakh every month for 9 years.

More the tenure, the lesser the amount of contribution required. We help you invest in Indian mutual funds that can generate an annualised return of 15-18%²³ . We can also help you stay on course.

On the other hand, real estate requires a sizeable commitment upfront and no diversification.

What are the benefits of investing per month basis?

One of the best ways to invest regularly and systematically is through SIP or Systematic Investment Plan. SIP is a mode of investing in mutual funds where you invest a fixed amount every month in a chosen scheme.

SIP has several benefits over lump sum investing, such as:

• It helps you develop a habit of saving and investing.

• It allows you to buy more when the market is down.

• It reduces the risk of timing the market and missing out on opportunities.

• It enables you to benefit from compounding and create wealth over time.

Equity mutual funds are one of the most tax-efficient investment options available in India. They are subject to long-term capital gains tax (LTCG) of 10% on gains exceeding Rs. 1 lakh in a financial year if held for more than one year. Short-term capital gains tax (STCG) of 15% is applicable on gains if held for less than one year.

How are well-to-do investors investing in mutual funds via SIP?

According to a report by CNBCTV18⁴ , well-to-do investors are now investing Rs. 5 lakhs to Rs. 25 lakhs in mutual funds via SIP. They are diverting their rental cashflows to SIPs to generate better returns.

Mumbai-based businessman has invested Rs. 25 lakhs per month in equity mutual funds via SIP for the last seven years. He has shifted his rental income from his commercial properties to SIPs, as he believes that equity mutual funds can give him higher returns in the long run.

The report also mentions that many high net worth individuals (HNIs) are opting for SIPs as they offer convenience, discipline, and diversification. They are also using SIPs as a tool to rebalance their portfolios and reduce their exposure to debt and real estate.

Little about us:

Tejas: I am a chartered accountant and have been a finance professional for 11 years. I have worked with PwC and ACC Limited in the initial years. I interact with fund managers of various mutual fund companies to understand the investment style, discipline and strength of their research teams.

Romil: He is a certified financial planner and has been helping clients for the past 16 years. He helps clients with personal and business insurance along with mutual funds. He helps individuals and business owners to build their wealth and protect it with mutual funds and insurance.

If you are looking for professional guidance and assistance in achieving your financial goal of Rs. 5 crores by 2029, we would be happy to help. Please reply to this email.

Wish you a very happy Diwali and a prosperous year ahead.