How much do you have to invest a month to make crores of rupees?

K. ARAVIND

Some adjectives lose their sheen over a span of time. In the days of democracy, the adjective ‘king’ is still being used by the people as a tradition. Their monarchy is only in name. What is lost when social change comes is the meaning of the title of king. Words about economic prosperity have suffered a similar meaninglessness.

In the past, a person having Rs.1 lakh was called Lakpathi. Today, people in the Information Technology sector and government employees with five or 10 years of experience or officer rank receive a monthly salary of over Rs.1 lakh. Even then, no one calls him a millionaire. Even some is called that, it’s considered as a joke. If the one who had lakhs of rupees was a nobleman, the one who had crores of rupees was a millionaire. Even though Rs.1 crore still a huge amount, no one calls a person who has that much money a millionaire.

In the past, those holding Rs.1 crore were rare. People in those days saw such achievements as possible only for those with special blessings from God. Therefore, a person having a crore rupees was considered a millionaire. But today, with just Rs.1 crore, we may not even be able to achieve all our life goals.

For someone who is continuing with the goal of earning Rs 1 crore after 30 years of investment, it may seem that he is planning to earn a large sum of money, but that amount may not even be enough to meet his daily needs in future.

For example, suppose the current cost of living for a 30-year-old is Rs.3 lakh a year. He is investing in an equity mutual fund with the goal of retirement at the age of 60 after 30 years. Under the Systematic Investment Plan (SIP), he invests Rs.3,000 a month. The investment is targeted at Rs.1.05 crore after 30 years with an average return of 12% a year.

But will Rs.1 crore be enough for him to retire 30 years later and continue his retirement life smoothly? Assuming an average inflation rate of 60 per cent, he would need Rs.17.23 lakh a year for daily needs after 30 years.

At that time, if the interest he would receive from a bank for fixed deposit is six per cent and if he had deposited Rs.1 crore in the bank, he would get only Rs.6 lakh a year. If the tax is deducted, the return will decrease again. That is, he would get less than one-third of the amount he needs to live on by depositing Rs.1 crore in the bank. If you invest in a debt fund instead of investing in a bank, you can expect a slightly higher return, but you will not get the above amount.

If he wants to get Rs.17.23 lakh per annum with 60% return from the investment after 30 years, he has to have Rs.2.9 crore in his hand. If he continues with the existing SIP, he will have to get a return of 16.5 per cent per annum to get this amount. This is not easy to achieve. If the expected return is as high as 12 per cent, the monthly investment should be increased to Rs.8,500.