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Grow Your Small Savings To One Crore PDF
Grow Your Small Savings To One Crore PDF
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How to grow your
small savings to `1 crore
How to do magic
with your savings
Starting small and being regular can mean magic for your savings.
For all but the top one percent of Indians, one crore rupees is a big
amount of money. The tag is justified. Most of us are barely able to
save a few thousand rupees a month if we try really hard. It seems a
little fantastic to imagine that these small savings could add up to
`1 crore.
However, the fact is that they can. They can do it only if the saver
starts early, chooses the right kind of investments, and, just as impor-
tantly, avoids the wrong kind of investments. However, the title of
this report is a little misleading. What one crore is today, it’s not going
to be ten or twenty years from now.
You must have seen old Bollywood movies from the sixties or seven-
ties, in which fabulously rich people would be referred to as
‘Crorepatis’. In ‘Sholay’, released in 1975, the ‘sarkar’ had put a prize
of ‘pachchas hajjar’ (`50,000) on Gabbar Singh’s head. That sounds
like a ridiculously tiny amount of money today.
3
How to grow your
small savings to `1 crore
Why `1 crore?
Even though converting savings of a few thousand rupees a month into one crore rupees
looks like a difficult task, starting early and having the right approach will make it achievable.
I
t looks like a huge problem--you SOME EXPENSES ARE RISING FASTER THAN OVERALL INFLATION
manage to save barely a few 0DQ\RIWKHVHH[SHQVHVDUHSDUWRIWKHFULWLFDOÀQDQFLDOJRDOVRIPRVWLQYHVWRUV
thousand rupees every month, WHAT IT COST WHAT IT COSTS WHAT IT MIGHT COST
and yet when you retire—or even EXPENSE IN 2000 NOW (2019) IN FUTURE (2030)
4
How to grow your
small savings to `1 crore
`1 crore 5 years
`2 crore 10 years
`3 crore 16 years
`4 crore 23 years
`5 crore 32 years
6RXUFH9DOXH5HVHDUFK Note: Withdrawals are inflation adjusted and will rise by 6% every year
W
hile regular investments PPF (Public Provident Fund) for What have you gained? Well, you
are important, it is retirement savings. Unfortunately, are better off than having kept it as
equally important to these earn very little over and cash, or having kept money in a
invest in the right type of asset in above inflation. In fact, there are savings bank account. However,
order to actually reach your many periods when these deposits you have not GAINED anything.
financial goals. It’s clear from the actually grow slower than the pace From a retirement perspective, you
calculations above that the main at which prices are rising. For are poorer!
enemy you have to fight against is example, you deposit `10,000 in So is there a solution?
rising prices. Unfortunately, the PPF and some years later, it has Fortunately, there is. The solution
weapon that most Indians bring to grown to `15,000. However, by is equity, that is, stocks. The only
this fight is not adequate. We tend that time, things that used to cost reason people hesitate before using
to use fixed income options like `10,000 earlier also cost `15,000. equity is that they think it’s very
5
How to grow your
small savings to `1 crore
1.25
1.00
0.75
0.50
PPF
0.25
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
6RXUFH9DOXH5HVHDUFK *Based on the return of the Sensex Total Return Index
2YHUWKHSDVW\HDUV`ODNKLQ33)ZRXOGKDYHJURZQWR
`ODNK7KHVDPHDPRXQWLQYHVWHGLQWKH6HQVH[ZRXOG
have grown to as much as `12.12 lakh!
6
How to grow your
small savings to `1 crore
D
ifferent cars suit different generally be withdrawn without any thousand rupees. And what’s more,
drivers. Those driving on delay. There are many more you can invest more, (or redeem) in
country roads prefer the advantages to making your small batches.
ruggedness of SUVs whilst city investments through mutual funds.
dwellers prefer the convenience of 7UDQVSDUHQWZHOOUHJXODWHG
sedans. The answer is quite the same (DV\GLYHUVLILFDWLRQ LQGXVWU\
for investors - certain types of One of the basics of safe Mutual funds are
investors are better suited to mutual investing is to spread obligated by law to
funds whilst others may do better your money across release
with stocks. Stock investing requires different investments. comprehensive data
greater time from the investor and Mutual funds are an about their operations
more application of mind than fund easy way to do this. Each and investments. All
investing. mutual fund spreads money across a funds release NAVs (Net Asset
A mutual fund is a financial large number of investments. Value) daily and most release their
intermediary, set up with the goal of complete portfolio every month. The
professionally managing money Choice SEBI (Securities and Exchange
pooled from a large number of There are mutual funds Board of India) regulates the fund
investors. By pooling money together available for every kind industry very tightly and is
in a mutual fund, investors can enjoy of return and risk level constantly refining the applicable
economies of scale. Instead of each and suitable for every rules to protect investors better.
investor trying to undertake his or her kind of time horizon. No
own investment research, a team of matter what kind of 3URYLGLQJDFFHVVWR
professionals can do so for them investment you want, there’s likely to LQDFFHVVLEOHDVVHWV
together. Mutual funds are run by be a variety of funds that suit you. There are many
mutual fund companies, also known investments you can
as Asset Management Companies Convenience conveniently make
(AMCs). Each AMC operates a You can easily invest as only through a
number of funds suited to different well as withdraw from mutual fund. For
types of investment needs. mutual funds in any example, the stocks of
For the individual investor who amount. Investments foreign companies. For most of us, it
doesn’t have much time to study and can be made by filling would be prohibitively complex to
research investments himself, mutual up a simple form or even open brokerage accounts and buy
funds are one of the best options for online with a direct debit from your shares in different countries.
reaping the benefits of different types bank account. Similarly, redemptions However, you can do so easily by
of investments with minimum effort can be made directly to your bank investing in an international fund.
and at a low entry point. In most account and take no more than three
funds, it is possible to start investing working days. If you wish to buy
with as little as a thousand rupees or enough shares to have a diversified
even less. Also, unlike many other set, you will need a lot of money to
investments, mutual fund do so. However, through a mutual
investments are highly ‘liquid’. fund, you can invest in a diversified
‘Liquid’ means an investment can set of stocks for as little as a few
7
How to grow your
small savings to `1 crore
&UHDWHDPRQWKO\6,3
Start investing regularly in your
chosen funds. You can put that on
BECOME A CROREPATI
+HUH·VZKDW\RXQHHGWRLQYHVWSHUPRQWKWRDFKLHYH\RXUJRDOLQWKHEHORZPHQWLRQHGWLPHSHULRGV
`30,600* 1
10 years crore
`12,100* 1
15 years crore
`5,400* 1
20 years crore
`2,600* 1
25 years crore
`1,300* 1
30 years crore
*Increase investment amount by 10% per year Calculations assume compounded annual return of 12%
6RXUFH9DOXH5HVHDUFK
An apple a day keeps the doctor away. Atleast `1,300 a month is your apple for achieving financial health. With higher savings invest-
ed regularly every month, you improve your financial health dramatically.
8
How to grow your
small savings to `1 crore
WEALTH CREATORS
5HWXUQVIURPDPRQWKO\6,3RI`10,000 over the last 20 years
20-YR CAGR
In ` crore Equity
2.0
multi-cap
16.87%
1.6 Equity
tax-saving
16.18%
1.2
Aggressive
Hybrid
0.8 13.59%
0.4
AMOUNT
INVESTED
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
6RXUFH9DOXH5HVHDUFK
Our `1 crore plan assumes a conservative 12% rate of return. The actual 20 year returns of the fund
categories have been higher at 16.87%, 16.18% and 13.59%. In short, you could potentially achieve your
`1 crore goal, even faster.
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UHGHHPDQ\LQYHVWPHQWVFRQVLGHUWKHWD[DQGH[LWORDGLPSOLFDWLRQV
RIGRLQJVR
9
How to grow your
small savings to `1 crore
I
f you start putting `5,000 into the first five years of your career
a scheme that earns 12% will account for almost 21% of
returns, in 30 years it would your retirement corpus at 60. This
grow to `1.54 crore. But of course, is based on the assumption that
as time goes by, you will earn the amount saved will increase by
more. So you must increase the 10% every year. So, even though
investment too. If you increase you will be saving more in the
the investment by a modest 10% later years, what you put away in
every year, the corpus will be a the first few years is critical. Miss
huge `4 crore. these golden years of saving and
However, a delayed start can your corpus will be smaller by the
cost you heavily. What you save in same proportion.
If you start now 1 year late 2 years late 3 years late 4 years late 5 years late
17 34 50 67 83
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10
How to grow your
small savings to `1 crore
Takeaways
Even though converting savings of a few
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Starting early is extremely important. The
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While calculating what they will need in the far
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Equity may look risky over short periods, but
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WRHDUQHQRXJKIRUDFRPIRUWDEOHIXWXUH
Unless you are willing to devote a lot of time
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11
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