Kab Banoge Crorepati? In how many years can you get Rs 1 crore with Rs 25,000 monthly investment – explained
Rs 1 crore is a nice big round figure that everybody likes and many aspire for. It is a magic number for many Indian savers: a milestone of financial security and a goal that feels both ambitious and achievable. The question is: how many years will it take you to reach there if you can invest Rs 25,000 a month? The answer depends entirely on where you put your money.Regardless of the path, the real driver is consistency. An investment of Rs 25,000 a month, invested with discipline, can make you a crorepati. It’s just a matter of when, and how much risk you’re willing to ride. Let us look at how much time some commonly used investment options will take to build a corpus of Rs 1 crore.
How soon can you build Rs 1 crore corpus with monthly investment of Rs 25,000?
*Post tax returns in 30% tax bracketBank deposits: 20 years and four monthsThe safest option is also the slowest, taking over 20 years to reach the target. While your capital is safe and the returns are assured, the interest is fully taxable, which eats into the returns. Banks are offering around 6.8-7% on 5-year fixed deposits and recurring deposits. But in the 30% tax bracket, the post-tax return will be only 4.88%. There’s also the problem of reinvestment risk. Bank deposits are rarely beyond a tenure of 5 years, so the investor will have to reinvest the proceeds once the deposits mature. If the rate has declined by then, the Rs 1 crore goal will get even longer. Bank deposits work best for ultra conservative savers who can’t stomach volatility and don’t mind waiting.PPF: 17 years
- Current interest rate: 7.1%
This is a better and more efficient option since the interest earned is tax free. With government backing and tax benefits (EEE status), the PPF offers steady growth. However, PPF has an annual investment limit of Rs 1.5 lakh per individual, so it is not possible to invest Rs 25,000 a month in this option unless two individuals (maybe husband and wife) do this together. If each of them invests Rs 12,500 per month in the PPF, they can reach the Rs 1 crore mark in 17 years.Provident Fund: 15 years and 11 monthsThis trusted retiral benefit scheme for salaried individuals offers assured returns and tax advantages. Contributions are linked to the salary of the individual, but can be hiked to some extent using the Voluntary Provident Fund. Contributions are deducted directly from salary, ensuring disciplined and regular savings without active effort. NPS: 15 years and 4 monthsUnlike the fixed income and assured returns options discussed above, this scheme is a market linked option. The returns are not assured, and will depend on how the market performs. But if the investor has a long-term horizon, and a healthy mix of debt and equity exposure, blended returns of 9% are achievable. The glitch is that the money is locked in till you turn 58. Even at 58, 40% of the corpus must compulsorily be put in an annuity that will give a monthly pension for life. This reduces the liquidity for the investor.Hybrid funds: 14 years and 8 monthsFor investors who want to avoid the restrictive rules of the NPS, hybrid funds are a good alternative. These funds invest in a mix of equity and debt. Some even invest in commodities such as gold and silver. These multi-asset funds can be a stable way to reach the Rs 1 crore target. But keep in mind that gains are taxable so the Rs 1 crore corpus might be pruned by tax. Ulips: 13 years and 5 monthsThese insurance-cum-investment products can help you build a Rs 1 crore corpus. But the maturity amount will no longer be tax free if the annual premium exceeds Rs 2.5 lakh. In your case, it will be Rs 3 lakh. The upside is the Rs 30 lakh life cover that comes with the plan. Also, while newer ULIPs have become cheaper and more transparent, they still carry high exit charges and offer limited flexibility. Returns will vary based on fund choice and market cycles. Equity funds: 12 yearsEquity mutual funds are perhaps the most efficient way to build your corpus. A well-managed SIP in a diversified equity fund can hit Rs 1 crore in just 12 years. The downside? Short-term volatility and the need for discipline through market ups and downs. The maturity amount will be taxable because of the change in rules for capital gains in recent years. But adept tax planning and regular harvesting of gains every year can reduce the tax liability to a great extent.Direct stocks and PMS: 10 years 11 monthsWant to make your money grow faster? You can opt for direct investments in stocks or sign up for a Portfolio Management Service (PMS). It is the fastest route which can build a Rs 1 crore corpus in less than 11 years. But that speed comes with high risk. Stock markets can be brutal, and very few investors consistently beat mutual funds over long periods. PMS services also come with high fees and minimum investment thresholds.
