Rs 1 Lakh to Crorepati: This investment strategy can help you reach Rs 1.74 crore in 3 decades

Rs 1 Lakh to Crorepati: When you invest, you aspire to build a huge corpus with limited investment. Some investors prefer a guaranteed return scheme; some opt for market-linked options; others pick a mix of both. There are investment strategies that can help you achieve a corpus running into crores in a few years; there are ways that can help you get steady returns to build a significant corpus over a long period of time. 

However, there is an investment strategy that involves investing in diverse options with low-to-high risk. With this strategy, if one invests Rs 1 lakh a year for 20-30 years in different proportions to low-risk, medium-risk, and high-risk investment options, they can build a corpus of Rs 1.74 crores in years. 

In this strategy, the low-risk investment ratio is 50 per cent, the medium-risk ratio is 25 per cent, and the high-risk ratio is 25 per cent.

According to Kirang Gandhi, an independent money manager, a diversified approach aims to balance risk while ensuring stable growth of wealth over the long term.

"By systematically investing and reinvesting in these proportions, individuals can aim to accumulate substantial wealth, potentially reaching crores, especially in the context of the Indian market, where diverse investment opportunities abound," he further said.

How much return can one get on an annual investment of Rs 1 lakh? Know calculations

Gandhi explains that an investment of Rs 1,00,000 annually gives possible returns in all three categories: low-, medium-risk and high-risk.

If anyone invests an amount of Rs 1,00,000 using this strategy, they have to allocate Rs 50,000 or 50 per cent to low-risk assets like fixed deposits or debt mutual funds, Rs 25,000 or 25 per cent to medium-risk investments such as balanced mutual funds or large-cap stocks, and the remaining Rs 25,000 or 25 per cent to high-risk options like small-cap stocks or sector-specific mutual funds.

Investors will get average returns on these investments of 6 per cent on low risk, 10 per cent on medium risk, and 15 per cent on high risk. By following this strategy for the next 20 to 30 years, it increases returns or wealth, with compounding or other disciplined investment.

The fixed ratio does not account for changing personal financial situations or goals, suggesting that investors may need to adjust their allocations as their risk appetite and financial objectives evolve over time, Gandhi advised.

To achieve a corpus of over Rs 1.70 crore through annual investments of Rs 1,00,000, you would need to focus on long-term investment strategies that offer compounding returns. Here is what expert calculation says:

Assumptions: Amount, time-period and returns

• Annual investment: ₹1,00,000
• Investment period: 20 to 30 years
• Average annual returns: Assumed at 10 per cent for illustration purposes, considering a diversified portfolio.

Now, we'll calculate the future value of the annual investment of Rs 1,00,000 over 20 to 30 years, with an average annual return of 10 per cent.

Future Value (FV) formula for compound interest: FV=PV×(1+r) n

Where:

• ‘FV’ is the future value of the investment
• ‘PV’ is the present value (the initial investment)
• ‘r’  is the annual interest rate (as a decimal)
• ‘n’ is the number of periods (number of years in this case)

Future value for both 20 and 30 years:

For 20 years: 

20 = 1,00,000 × (1+0.10) 20FV20 = 1,00,000 × (1+0.10) 20
20=1,00,000 × (1.10) 20 FV20 = 1,00,000 × (1.10) 20 
20 = 1,00,000 × 6.727 FV20 = 1,00,000 × 6.727
20 = Rs 67,27,000 FV20 = Rs 67,27,000

For 30 years:

30 = 1,00,000 × (1+0.10) 30 FV30 = 1,00,000 × (1+0.10) 30
30 = 1,00,000× (1.10) 30 FV30  = 1,00,000 × (1.10) 30 
30 = 1,00,000 × 17.449 FV30 = 1,00,000 × 17.449 
30 = Rs 1,74,49,000 FV30 = Rs 1,74,49,000

As you can see, with an annual investment of Rs 1,00,000, the investment could grow to approximately Rs 67.27 lakhs in 20 years and around Rs 1.74 crores in 30 years.

Should you follow this strategy if your retirement is near?

Kirang advised that investing might not be suitable for those nearing retirement or individuals with a low-risk tolerance.

How much tax will you pay for using this investment idea?

Due to diversity, each category comes with different taxes, depending on the time period and the type of investment. For instance, long-term equity investments and mutual funds are taxed at 10 per cent if your returns exceed Rs 1 lakh in a year. While on FDs, it depends on person-to-person income tax slab rates.