Who doesn’t dream of earning 1 crore from the stock market. A lot of people want to, but very few have been able to successfully achieve the goal.
Reason? There are no short-cuts. There is no quick money. It requires time, patience, and hard work.
In this article, we will give you easy-to-follow steps to earn 1 crore from the stock market.
Assuming you are starting from 0 today, this article will also tell you how much time you need to achieve the goal of 1 crore.
Do read the article till the end.
- Save 20-25% of your income: If your salary is ₹ 50,000; you should try to save and invest 10,000 to 12,500.
- Invest in Index funds: If you do not have any knowledge or experience in the stock market, invest in a low-cost Nifty 50 index fund. The chance of losing money in the long run is extremely low here.
- Increase monthly SIP: As your career progresses and salary increases, increase the monthly SIP amount – preferably 10% increase every year. Example: If you invest decide to invest 5000 every month this year, you should target investing ₹ 5500 per month in 2023, ₹ 6050 / month in 2024 and so on.
- Be consistent: Consistency is the key. You should not skip your monthly SIP investment. The best time to invest is immediately after salary is credited to your bank account. Do not wait till the end of the month.
Monthly SIP for 1 crore
How much should you invest every month to achieve your target of 1 crore? The table below has the answer.
The calculation is based on the following assumptions:
- You invest consistently every month without fail.
- You increase your monthly investment amount by 10% every year.
- Nifty gives 13% returns, which it has historically done in the last 25 years.
|Monthly Salary||Saving||Monthly SIP||1 crore in|
If you haven’t understood the table above. This is how you read it:
- If you earn salary of 10,000 per month, and manage to save 10% which is ₹ 1000 – then in 32 years you will have 1 crore worth of investment. Do not, you need to increase your SIP amount by 10% every year. If you invest 1000 every month in 2022, then you need to invest 1100 every month in 2023 and so on.
- Since it is hard to save a lot of money when your salary is low, we have increased the percentage of savings as the salary goes up.
- A person who earns 50,000 per month, should try and save 20% of his or her salary every month.
- When salary crosses 1 lakh a month, saving 30% should not be difficult even with a decent lifestyle in a metro city. For a person earning 20k a month, it would be a struggle to save more than 10% – because most of the income would go towards basic necessities.
- The above numbers are approximates, varying from person to person and also depending on the city you live in and other factors.
How to quicken the process?
The focus should be on increasing your income, not increasing your returns from the stock market.
A big mistake people do – trying to increase returns by trading in derivatives (futures and options) or buying risky small and mid-cap stocks. This could work for a full-time experienced trader, but will prove to be disastrous for a less-experienced market participant.
In the first 3 years, you should take the mutual fund or index fund route. Aggressively save and invest as much as possible.
If you are young and earning well, you could invest 50% of your savings in an index fund and 50% in a mid/small cap mutual fund. While Small cap funds are riskier and more volatile, they should be able to outperform Nifty 50 in the long run.
Some tips to increase your investment:
- Look around your house. Do you have any gadgets lying around which you do not use? Go ahead sell those and invest the money in the market. A fast-depreciating asset now has become a fast-appreciating asset.
- Save more by maintaining the same old lifestyle when your salary increases.
- Focus on improving / upgrading your skills, which should help you earn more and also save more without comprising on your lifestyle.
- Alternatively, you could also get into a side-hustle like an internet business for example. It is always good to have more than one stream of income.
- The first 5-10 years are crucial. The more you save in these years, the quicker you will be able to enjoy the power of compounding.
Your 20s are crucial
Those 8-odd years when you start earning, till you reach the age of 30 are crucial. This is a period when most mistakes happen.
Even small amounts you save in your 20s, can reward you in your 30s and 40s.
This does not mean you do not enjoy your 20s.
Try avoiding the big expenses. Some tips below:
- Buy a mid-range Android phone instead of an iPhone.
- Travel in India instead of going to exotic vacations abroad.
- Buy a small car instead of a larger car loaded with high-end features. Not only do you save a lot of money when you buy the car, but the saving on insurance, maintenance and fuel expenses is going to be ‘huge’. The money saved here, if invested wisely, could buy you a Mercedes in your 30s!
- Stay in a rented house instead of buying your own house.
Being smart about the big expenses you make, can be life changing. After all, it is always better to be financially free in your 30s or 40s instead of 50s or 60s.
Things get easier after 1 crore
The ‘1 crore liquid investment’ milestone is the most difficult. After which your investment should compound and grow larger at a much faster pace.
For example, even if you generate 10% returns on 1 crore, the value of your investment has gone up by 10 lakhs!
Going from 1 crore to 2 crore is much-much easier than going from zero to 1 crore. If you stop saving after you reach the milestone of 1 cr, you should touch 2 crore in about 5-6 years if your investments compound at 12-13%.
After that the investment will begin to compound at an even faster pace, and will soon reach a point where you do not have to worry about money ever again.
1 crore is a journey not a destination
This is a very important point. There are two kinds of people. Those who never try to save and invest. And others who get too obsessed with increasing their net worth.
Avoid doing both. Balance is the key.
Working in a field / job you enjoy, growing your skill, adding value to the company you work in – can all make the whole process of ‘working – earning – saving’ a lot more enjoyable.
Enjoying the journey of getting to 1 crore, is a lot more important than actually getting there.
Once you start enjoying the journey, you no longer care about the time taken to reach the destination.
For a lot of people, 10-15 years might seem like a lot of time. In reality, it isn’t. Time passes quickly, more so when you enjoy what you do.
Very good read. Especially for people who have just started their career.