This post shows how to reach a goal like 1 crore in 10 years or any such amount in any time you want

A crore is a very large amount for someone who is just starting to invest. It is also a very aspirational target for anyone who has been investing for some time since the first crore of corpus is always special.

We will use the plan Excel workbook as the base for these calculations. There are some assumptions that need to be made in order to get started

• the duration of the goal say 10 years
• the inflation applicable - a figure like 7% can be assumed under the current circumstances
• the equity and debt returns for long term
• risk profile of the investor (assumed medium)
• the SIP increment every year (assumed 5% increase in the SIP amount year on year)
• starting corpus (we assume that the investor starts from a base of zero in the example)
• the risk management plan via rebalancing - yearly rebalance and a gradual reduction in equity percentage over time

The choice of funds for both equity and debt comes after this but does not impact the SIP amount.

📚 Table of Contents

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• Walkthrough of the example
• Conducting a review a year later
• Some caveats of thinking of single targets like 1cr in 10 years
  • Effect of inflation
  • Need to set a goal

Walkthrough of the example

In the Excel sheet, the cells in yellow are assumption cells that can be edited.

We see that a SIP amount of ₹ 56,710 with a split of 30% in equity (₹ 17,013 as SIP amount) and 70% in debt (₹ 39,697 as SIP amount). This SIP is run for one year and then rebalanced: the new corpus is split 24:76 into equity and debt and a new SIP is started. As the pie chart shows, ₹ 86 lakhs is the expected investment over 10 years and ₹ 14 lakhs is the return on the investment. A few things that need to be noted:

• the SIP amount changes every year. We have assumed a 5% increase but since the market return is unpredictable, it will be different from 5% every year
• the goal needs to be reviewed yearly since the market return is unpredictable and the equity component of the goal will gradually reduce over time

While the table and the chart shows a smooth and linear growth, in real life the returns will fluctuate and the actual path will be different.

Conducting a review a year later

This is a very important step since just by starting a SIP, there is no guarantee that the goal will be reached. After one year, this is now a 9-year goal with some non-zero corpus (say ₹6.5 lakhs - should have been ₹ 7.01 lakhs but the market gave lower return), a new asset allocation (24:76 equity to debt) and a new SIP amount of ₹ 60,036 (₹ 14,409 in equity, ₹ 45,627 in debt) as shown below. The SIP is bumped up by 5.9% from ₹ 59,546 (previous estimate for the second year) to ₹ 60,036 due to the underperformance in equity. Also, there is a requirement to rebalance as well between debt, equity and cash that needs to be done every year to ensure the appropriate asset allocation is adhered to.

Using this Excel workbook, you can plan for any target amount for any period of time from 1 to 30 years. Some sample SIP values (starting with zero lump sum investment) are shown below:

Some caveats of thinking of single targets like 1cr in 10 years

Effect of inflation

Due to inflation, the worth of ₹ 1 crore will be almost ₹ 50 lakhs or less in 10 years. This is because, at 7% lifestyle inflation (this will obviously be different from government figures), the value of 100 lakhs in 10 years is reduced to 100/(1+7%)^10 ~= 50 lakhs. This means that you can purchase, after 10 years, only that which costs 50 lakhs today. To purchase what costs 1 crore today, you need to target 100 * (1+7%)^10 ~= 2 cr in 10 years.

Inflation: the impact on your goals and how to choose assets that beat it

Need to set a goal

As we have covered here on the requirement to set goals before investing, just by having a numeric target like 1 crore in 10 years does not serve any purpose. The question you need to ask is - what am I supposed to do with 1 crore? Where will I spend it? What will that 1 crore become in 20 years? These questions will lead to the next step of the journey and provide the necessary clarity.

These posts cover the entire goal-based investing journey in detail:

• Part 1: As someone new to investing and started earning, what should I do with money?
• Part 2: As someone who has heard about goal-based investing, how do I get started?
• Part 3: I am now ready to do goal-based investing, how do I get started?