How To Earn ₹1 Crore in 5 Years?

Strategies to earn ₹1 Crore in 5 years

Here are the key strategies on how to earn 1 Cr in 5 years.
 

1. Define your financial goals early

   You must begin by clearly defining your financial goals for the future. Decide exactly what you intend to do with all your accumulated funds later on. This may include retiring early or paying for a child’s higher education fees. Establishing clear objectives is a first step that directs your significant financial choices. The early you start, the simpler it is to accumulate wealth in the long term. 
   
   

2. Plan Your Path 

   Once your goals are set, you must create a plan to achieve them. A well-structured financial plan may help guide your focus toward near-future actions, such as reducing debt and establishing an emergency fund.

   Your plan must be practical, adaptable, and long term oriented. Periodically review your progress and make the appropriate changes to stay on track.

3. Invest in Equity Mutual Funds

   Equity mutual funds² can provide potential returns in the long term. They invest in a wide portfolio of stocks, minimizing the risk of financial losses.

   It is essential to select an appropriate mutual fund scheme that suits your investment needs and risk tolerance. You must also do proper research and consult a financial advisor before investing in mutual funds.

4. Tax Planning 

   Taxes often go unnoticed but may significantly impact your wealth-building efforts. While income and sales taxes are well-known, your investments and assets may also be subject to taxes. 

   Therefore, you must understand your tax* liabilities and develop strategies to minimise their impact. You may take advantage of tax deductions and exemptions by investing in tax-saving investment plans such as:
    

   • Public Provident Fund (PPF),

   • Equity Linked Saving Scheme (ELSS), and 

   • National Pension System (NPS).

Best investment options to earn ₹1 Crore in 5 years

There are many ways to invest your savings. Let’s look at some popular options:
 

• Stocks:  These represent part ownership in a company. You may benefit if the stock price increases over time through market growth. Stocks are typically riskier than bonds, but risk levels can change between various companies.

• Bonds: Buying a bond means the issuer promises to repay your original amount later. They also agree to pay you a set interest amount after a specified period. Bonds are generally less risky than stocks but offer a lower chance of large gains. Risk levels differ among bonds, with rating agencies assigning grades to show their safety.

• Mutual funds: Mutual funds pool together various securities, often including stocks, bonds, or a combination of both. Mutual fund shares allow you to acquire a fractional interest in the entire portfolio. They also carry varying risk levels, depending on the nature of their underlying investments.

• Exchange-traded funds (ETFs): ETFs are similar to mutual funds, holding diversified portfolios of securities, but they are listed on exchanges and traded like stocks.

  ETFs cover a wide range of areas, from major stock indices like the S&P 500 to specific industry sectors or asset classes such as bonds and real estate.

• ULIP Plan:

  Insurance is a key strategy in wealth accumulation, as it provides protection against potential risks, among other benefits. ULIPs Unit Linked Insurance Plans, offer a way to invest in a variety of market-linked assets. 

  These assets include equities, debt, and balanced funds, helping secure long-term investment gains.

How to achieve Rs. 1 crore in 5 years with mutual fund investments

Investing in mutual funds is an effective method of reaching sizeable financial goals, like savings of Rs. 1 crore in 5 years. The following three options can assist you in achieving this goal:
 

Option 1: Saving Rs. 1 Crore in 5 years via SIP (Systematic Investment Plan)

SIPs involve regular investing of a fixed sum in mutual funds, typically on a monthly basis. This approach benefits from compounding and rupee cost averaging to average out market fluctuations.
 

Example:

Ravi is 32 years old and works as a marketing manager professionally. He plans to invest ₹1,00,000 monthly into a mutual fund focused on company shares. He anticipates his investment will grow by about 10% on an annual basis. Ravi continues this consistent monthly investment for five full years. His steady payments help him manage market rises and fall consistently. He successfully saves a total of ₹1 crore at the end of the five-year period.
 

Option 2: Saving ₹1 crore in 5 years via lump sum investment

Lump sum investment is the substantial amount that is paid in one go. It can be suitable for individuals who possess huge savings to invest from day one.
 

Example:

Seema, who is 40 years old and a lawyer by profession, invests Rs. 70 lakhs in a mutual fund with a growth perspective, hoping for a return of 11% per annum. By keeping this investment for 5 years, Seema achieves her target of Rs. 1 crore. The benefit of investing lump sum is that she has the opportunity to utilise the potential for growth of the market from the very beginning.
 

Option 3: Saving Rs. 1 Crore in 5 years with step-up SIP

A Step-up SIP allows you to increase your investment amount gradually over time. This increase usually takes place on a yearly basis. This method works well for people whose earnings are likely to rise annually. They can then afford to invest more funds as their financial health improves later on.
 

Example:

Vikram, who is 30 years old and is an IT professional, begins by investing Rs. 50,000 per month in SIP.  Each year, he raises his SIP by 12% hoping for a return of 9% every year. This approach allows Vikram to achieve his goal of reaching Rs. 1 crore within 5 years and make changes to his investment as his salary increases.
 

By learning these techniques and applying them according to your financial resources, you can choose the one that suits you and can potentially start accumulating Rs. 1 crore in 5 years by way of mutual funds.

How much investment in mutual funds is required to reach Rs. 1 crore?

In order to accumulate Rs. 1 crore within 5 years by way of mutual funds, the investment required by you is based on the desired annual return. Assuming a 12% annual return, the following are your options:

• 
  SIP (Systematic Investment Plan): You would have to invest around Rs. 1,20,000 every month. SIPs are right for those who want to invest small amounts of funds on a regular basis, availing the benefit of rupee cost averaging.
• Lump-sum Investment: You will have to invest an amount of approximately Rs. 57,00,000. This would be appropriate for individuals who have a lot of savings and want to invest the funds all at once.
• Step-up SIP: You can reach your goal of Rs. 1 crore in 5 years, by investing Rs. 75,000 every month and raising the SIP amount by 10% every year. This may suit individuals who are likely to see their income increase over time and will be able to invest more as they earn more.

The important thing is to start early, stay consistent, and adopt the system which aligns with your financial position and target.
 

Steps to Increase Your Savings and Reduce Expenses

Setting up unrealistic savings goals is a common thing many people do, but the real problem is turning those goals into achievable plans. The key to your success is to choose saving strategies that are realistic, break them down into easy steps, and choose the ones that fit your budget and spending habits. 

1. Create a Budget: Before you begin saving, take a look at how your money flows. Having a well-prepared budget will help keep track of your income as well as your expenses, find the areas where you can easily cut back and then decide on the amount that would be manageable for you to put aside for savings.

2. Reducing Unnecessary Expenditure: In case you find it challenging to save the amount you desire, then your spending habits need to be reviewed. Nonessential expenses like eating out, subscriptions, and entertainment can be drastically reduced. One can also lessen the fixed monthly charges by seeking for the low cost deals available on insurance, utilities, or phone plans.

3. Debt Management: In case debt is the reason for reduced savings, then eliminating it becomes your priority. Making less interest payments will result in you having more funds for savings. Additionally, you can opt for debt consolidation through a personal line of credit to make repayment easier and faster.

4. Future Investment: After you have settled any debts and also established a fund for emergencies, you can think of investing your funds in other goals for a long period of time. 
    

   So whether it is considering retirement or going after long-held dreams, an investment option can be effective in the long run growth of your wealth.

Key Takeaways

Individuals must set clear financial goals, plan their approach, invest in equity mutual funds, and practice consistent tax planning to make Rs. 1 crore in 5 years.
 

In India, some of the popular investment options are shares, bonds, ETFs, mutual funds, and Unit-Linked Investment Plans (ULIPs).
 

To increase your savings, you can create a budget, manage debt efficiently, and invest wisely. 
 

Investment plan like ULIPs can help you build wealth for various long-term goals such as purchasing a house, funding your education, or planning your retirement.

ULIPs also provide life cover that helps you protect your family and make sure that your financial goals are met in case you undergo any unforeseen events.