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Introduction
For many, the dream of accumulating a significant financial corpus within a short period seems daunting. This is especially true for a 39-year-old unmarried individual earning Rs 1.05 lakh monthly who wishes to reach a goal of Rs 1 crore within the next five years. With existing investments in mutual funds, the National Pension System (NPS), and a life insurance policy, a strategic realignment is necessary to meet this ambitious target.
Current Investment Overview
1. Mutual Funds:
The individual has been consistently investing Rs 27,000 per month in mutual funds via a Systematic Investment Plan (SIP) for the last two years. Assuming an average annual return of 12%, this investment is on track to accumulate a corpus of approximately Rs 32 lakh over seven years. While this method of investment is prudent, it alone will not be sufficient to reach the Rs 1 crore goal in five years.
2. National Pension System (NPS) :
Investing Rs 4,170 per month into the NPS for the past two years primarily serves as a retirement tool. Although the NPS can provide an annuity income at retirement, its contribution towards immediate wealth accumulation is limited due to restrictions on premature withdrawal.
3. LIC Jeevan Saral Policy :
A monthly investment of Rs 5,000 has been made into this endowment policy since 2011. However, endowment policies like LIC Jeevan Saral are more aligned with risk management than wealth creation, as they generally do not outpace inflation. This policy does not align well with the goal of creating significant wealth in a short period.
Strategy to Achieve the Rs 1 Crore Goal
To meet the goal of Rs 1 crore within five years, the following strategic adjustments are recommended:
1. Stop NPS and LIC Contributions:
Since NPS and LIC Jeevan Saral are not aligned with the short-term wealth creation goal, it's advisable to halt these contributions. The Rs 9,170 previously allocated to these investments can be redirected towards more aggressive investment vehicles.
2. Increase Monthly Investments:
To achieve the Rs 1 crore target, the individual should increase their monthly investment by Rs 50,000, bringing the total monthly investment to approximately Rs 77,000. This can be allocated primarily to equity-based mutual funds, specifically 60% to a Large Cap Fund and the remaining 40% to a Flexi Cap Fund. This approach takes advantage of the growth potential in equity markets, which is essential for meeting the five-year target.
3. Gradual Increase in Investments:
It is also recommended to incrementally increase the monthly investment by Rs 10,000 each year. This strategy ensures that the investment contributions grow alongside any potential increases in income, maintaining momentum towards the Rs 1 crore goal.
Review and Realignment
The success of this plan hinges on regular portfolio reviews. The financial market is dynamic, and personal circumstances can change, necessitating adjustments to the investment strategy. Regular reviews will help in realigning the portfolio to stay on track towards achieving the financial goal.
Conclusion : A Strategic Path to Wealth Creation
Achieving a Rs 1 crore corpus in five years requires a disciplined and strategic approach, especially starting at age 39. The key lies in stopping non-aligned investments, reallocating funds to higher-growth potential options, and progressively increasing investment contributions. While the goal is ambitious, with the right strategy and consistent effort, it is attainable. The lesson here is that aligning investments with specific financial goals and regularly reviewing the portfolio are crucial steps in successfully reaching your financial targets.
