7 steps to make Rs 1 crore in the quickest time
How does one become a Crorepati? We have all thought about this one question a lot. Is it really possible to have that number? The answer lies in the equity market, to be more specific in systematic investment plans (SIPs) of equity mutual funds.
7 steps to make Rs 1 crore in the quickest time
- Make money, SIP by sip – A SIP is a financial planning tool offered by mutual funds that allow you to invest small amounts at regular intervals over a long period. It also allows one to use the power of compounding to generate big returns in a portfolio.
- In the equity market, the general approach of investing is to time the market whereby one tries to buy a stock or an index at a certain level and book profit when it has run up significantly. This approach often leads to common mistakes all investors, who tend to buy high (caused by the exuberance of a bull market) and sell low (due to the hopelessness caused by a bear market).
- Start early – Starting your SIP early is the first condition of becoming a crorepati. One needs to start early. This will help the investor use the power of compounding. Especially over a long period, the difference between starting to invest early versus starting late can make a significant difference to your wealth.
- What’s the next step? Investors should first chalk out their long-term financial goals to identify how much mutual fund investment one needs to make every month.
- Talk to the right guy The next step is to decide on the right fund house and fund. They will be looking after your money every single day till you redeem and, therefore, they are like the coach on who you want to entrust your life’s savings.
- Mix it up – SIPs are not just about pouring all the money into the equity market. The mark of a great portfolio is the distribution of risk and diversification across asset classes. One important element in mutual fund investing is the split in asset allocation between equity and debt.
- Become the gardener – SIP investing is not about putting in some money and forgetting it, the way Warren Buffett will have you do it. It is more like being a gardener, who looks after his plants almost every day just to ensure weeds are not cropping up. An investor must, therefore, monitor the performance of a SIP.
- Taking home the crore – If you have reached this point, you did well. But just investing is not enough, you have to take home all that moolah too. There’s a systematic way to do that, too. Systematic withdrawal plans (SWP) can help you redeem your investment when you hit the retirement buzzer.
Whatever be the case, the investment objective must remain sacrosanct and the investment plan must be made to accomplish the goal within the given time horizon and within a prudent risk framework.
