Saving Rs 1 crore on a monthly salary of Rs 25,000 may seem daunting, but it is achievable with consistent investments over an extended period. To reach this financial milestone, setting a clear monetary target is crucial. Once the goal of saving Rs 1 crore is established, the next step is to identify the most suitable investment vehicle.
Equity investments have historically delivered higher returns compared to debt instruments.Although equities are associated with higher risk, they have proven to be rewarding and capable of generating superior returns over the long term, says an ET analysis by Anulekha Ray.
When aiming to accumulate a substantial sum like Rs 1 crore, investing in an equity mutual fund through a systematic investment plan (SIP) is a wise choice, the analysis says.
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With a mutual fund SIP, you commit to investing a fixed amount at regular intervals, typically every month. Even if the initial investment amount is modest, the power of compounding and rupee-cost averaging enables you to save a significant lump sum over time.

How To Save Rs 1 crore

While it’s not advisable to allocate a significant portion of your income to a Systematic Investment Plan (SIP), it’s crucial to consistently set aside 15-20% of your salary each month for long-term financial objectives. However, investing a smaller sum means it will require more time to reach your target.

Based on this calculation, you will achieve your goal of becoming a crorepati in just under 22 years (264 months) if you increase your SIP installment by 10% annually.

Step-up SIP strategy:

Accumulating Rs 1 crore can be achieved more quickly by employing a step-up SIP strategy, which involves increasing your monthly SIP installment annually as your salary rises. This approach not only helps combat the negative impact of inflation on your savings but also enables you to align your savings with your income growth.
By starting with a monthly SIP investment of Rs 4,000 and increasing it by just 5% each year, you can reach your goal of Rs 1 crore in approximately 25 years (301 months). The step-up SIP works by gradually raising your investment amount.
For example, if you begin with Rs 4,000 per month, after a year, you would increase it to Rs 4,200 per month for the entire second year. In the third year, you would invest Rs 4,410 every month, and so on.
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The time required to accumulate Rs 1 crore decreases as you increase your initial SIP amount. If you start with Rs 5,000 per month and raise it by 5% annually, you can achieve your target in a little over 23 years (281 months). By increasing the SIP amount by 10% each year, you can become a crorepati in 20.5 years (246 months).
Similarly, starting with a monthly SIP of Rs 7,500 and increasing it by 5% annually, you can save Rs 1 crore in 20.3 years (244 months). A 10% annual increase would allow you to reach your goal in just under 18 years (215 months).
If you begin your SIP investment with Rs 10,000 per month and raise it by 5% each year, you can accumulate Rs 1 crore in 18.3 years (220 months). By increasing the SIP amount by 10% annually, you can achieve your target in a little over 16 years (194 months).
Remember, even if you can’t invest a substantial sum initially, don’t worry. Increase your SIP amount only if your salary increases. Consistency and gradual increments can help you reach your financial goals.
SIPs are generally ideal for long-term investments due to the principle of compounding. When investing in a mutual fund SIP, it’s important to commit for the long term. Maintaining patience and consistently investing over the years is key. If you can continue your SIP without interruptions, cancellations, or withdrawals during market downturns, you are more likely to achieve your financial goals.