One of the most common queries we have been receiving recently from the millennials (people aged between 26-41 years) is whether they will be able to accumulate Rs. 100 cr. in their lifetime through mutual funds?
Well, the answer is YES but it comes with a lot of caveats!
Considering a time horizon of 30 years and investment returns of 15% p.a.*, 100 cr. can be accumulated by an individual through the following ways of investment:
- Lumpsum investment of Rs. 1.52 cr.
- Fixed monthly SIP of Rs. 1.78 lacs
- Monthly step-up SIP of Rs. 79,650 (increasing at 10% on an annual basis throughout 30 years)
However, it is not as easy as it may sound. The journey is going to be really tough (like a roller coaster ride) – there will be periods of high returns, no returns, and even negative returns. To achieve this milestone of Rs. 100 cr. club, one has to do what others 99% can’t– be more disciplined than the rest!
As evident from the chart above, in spite of short-term volatility, equities have performed well in the long run.
Technology – Boon or a bane?
We did a short research on the portfolios of our 1500+ investors and found that investors above the age of 35 years are holding their investments for a longer period of time and are not churning their portfolios as much as investors below the age of 35 years! New-age investors may be looking for quick gains and if they do not get returns in a year or two, they are more likely to switch to another scheme, only to find it the same way.
One of the reasons is that they are habitual of seeing their portfolio returns on a regular basis – which won’t do any good to the portfolio but will definitely drain them emotionally. If one wants to compound wealth in equities, the first thing we recommend is to delete all the wealth-tracking apps and let the power of compounding work over the years.
Inflation
Inflation is a hidden tax. Value of Rs. 100 cr. after 30 years will be just Rs. 10 cr. in present terms (considering annual inflation of 8%). In the late 1990s, a Rs. 5,000 lumpsum investment in mutual funds looked like a big amount but today, people are willing to invest Rs. 50 lacs at one go. 3 decades down the line, a 100-cr. figure won’t sound like a bomb and we are very confident that there will be many people (especially the capitalists) entering this 100cr. club before the next 30 years!
But apart from financial advice, we ask youngsters to focus on their health and hobbies because what they’re seeking right now is money but as the money flows by in the later years of life, they are going to lose the time to enjoy it and by the time they have the time and money to enjoy it, they’ll lose the energy! So, cherish every moment of this precious life!
*Nifty has returned around 15% p.a. over the last 38 years. Past performance is not a guarantee of future return.
Very nicely articulated 👍🏻👍🏻