Math Hacks for Millions: Building Your Crore-Rich Portfolio

Imagine achieving financial freedom with just a few years of dedicated effort. Today, we reveal a strategy that transforms your investments into a perpetual money machine. Discover how to accumulate your first crore, set your finances on autopilot, and let compounding work its magic.

The Context

Imagine a world where your investment efforts and hard work aren’t a never-ending journey.

What if we revealed a strategy that allows you to hustle intensely for just a few years, setting your investing machine on autopilot? Sounds intriguing, doesn’t it? Today, we’ll investigate the mechanics of a financial apparatus that resembles a perpetual motion machine, generating returns and sustaining itself with minimal additional effort.

But first, let’s acknowledge the undeniable challenge of accumulating one crore in the equity markets as the initial milestone to start this money engine.

Laying the Foundation for Wealth

One crore, a significant sum of money, serves as the bedrock for any financial journey.

Well, we’re not referring to a quick and effortless influx of money from inheritances, lotteries, or strokes of luck. Instead, we’re focusing on the remarkable achievement of accumulating that first crore through your sheer dedication and unwavering efforts, carefully navigating through all the factors that impact your deliberate actions.

It’s about embracing the challenges and triumphing over them, knowing that your success is a result of your own determination and hard work. Once you overcome this initial hurdle and resist making reckless decisions, something magical starts to happen—you begin to experience the gratification of compounding.

With valuable knowledge and insights gained from both your successes and failures, subsequent increments in wealth become comparably easier. You’ve beaten the first threshold and paved the way for a brighter future.

Imagine a self-sustaining machine that defies conventional wisdom, operating with minimal effort and continually generating returns. This financial apparatus is the key to perpetual wealth generation. It disrupts the notion that financial success requires a constant infusion of money and effort. In essence, it challenges the laws of financial physics.

What It Takes

When individuals set off on their journey of direct stock investing, they often adopt a cautious mindset to safeguard their hard-earned money against potential losses. However, this conservative approach often leads to lower returns, making it challenging to accumulate the first crore while fulfilling life’s financial obligations.

There are various avenues available for gaining exposure to equities. Retail investors typically choose safer and passive options like mutual funds, NPS schemes, or complex products such as ULIPs. While these options provide a certain level of security, they often involve intermediaries.

In contrast, our investment philosophy emphasizes the significance of direct stock investing, granting us greater control and the potential for superior returns by bypassing middlemen. If you aspire to build your wealth-generating machine, immersing yourself in the knowledge and intricacies of investing is paramount, treating it as an academic pursuit.

Selecting individual stocks may appear easy, but it is equally crucial to master our mental faculties and effectively manage our emotions.

To further support your journey, we previously published an article on how to select your first stock. Feel free to read it by clicking here.

Achieving the first crore is undoubtedly attainable, but it demands a disciplined investment approach and long-term commitment. It’s not as simple as the way it’s depicted by financial influencers on social media.

One effective method to ensure disciplined investing is by consistently investing in robust stocks and potentially leveraging your decisions during market panics and downturns.

Not confident in your stock-picking abilities? No need to worry.

Here’s How You Can Begin

The journey of building a stock portfolio requires a deliberate and well-informed decision. A successful equity portfolio is never a result of random chance driven by tips, speculation, tons of decisions, or emotional excitement.

You can begin laying the foundation as soon as you meet the legal requirements to open a Demat account or when you receive your first salary, which is a gratifying moment. A definitive alternative is to explore low-cost ETFs like NIFTY BeEs, where you can invest in small denominations.

This approach, known as a hassle-free investment, doesn’t demand advanced analytics or intricate mathematical calculations. It provides an accessible and simplified way to participate in the market and potentially benefit from its growth.

The Nifty 50 index was introduced by the National Stock Exchange of India (NSE) on April 1, 1996, with a base value of 1000. As of June 2023, it has reached approximately 18,500. From a long-term perspective, since June 30, 1999, the Nifty 50 Total Return (TR) index has delivered an annualized return of 14.2% CAGR with an annualized volatility of 22.9%.

Please note: The TR index assumes reinvestment of dividends in the index, encompassing both Price Return (PR) and Dividend Return.

The Early Trade-offs

Let’s consider a hypothetical scenario: if you start investing a modest amount of just ₹5,000 per month in an Index ETF at the age of 25 and continue this monthly contribution, you can effortlessly accumulate a portfolio worth ₹1.12 crores by the time you reach 50 years of age.

Even if you further adjust the output for volatility by de-risking the overall return in-tune of 12%, you will still approach the significant milestone of ₹1 crore. It is, however, important to emphasize the need for consistency regardless of life’s challenges.

While committing ₹5,000 per month may initially seem difficult from your first salary, as you progress in your professional journey, this amount may gradually become more manageable. You’ll find that what once seemed daunting eventually becomes easier as you climb the ladder of financial success. Remember, the later you start investing, the higher your monthly contributions will need to catch up with the power of compounding.

For instance, if you’re reading this article in your 30s, you would need to invest ₹10,000 per month, and if you’re 40 years old, your monthly contribution to reach the ₹1 crore threshold would escalate to ₹52,000 per month.

Understanding this simple math sooner rather than later is crucial to deploy this strategy.

Let Auto-Pilot Assume Control

While many experts may consider a corpus of ₹1 crore at the age of 50 to be an insufficient amount, let’s explore the magic of compounding and see how it can work in your favor.

Suppose you have a preference for prioritizing life and family commitments after reaching the ₹1 crore threshold and do not plan to make any further investments beyond the age of 50. In that case, let’s explore the profound impact of automatic compounding on your accumulated wealth.

Your ₹1 crore investment portfolio has the potential to grow at an impressive rate of 14.2%, which means it could earn you ₹14.2 lakhs in the first year alone. Interestingly, this amount is twice the starting salary of an average Indian graduate from a Tier 1 college who works a standard 8-hour day.

Fun fact: In India, entry-level salaries can range from ₹1.0 lakh to ₹7.9 lakhs, with an average annual salary of ₹3.0 lakhs.

Now, here’s where the magic truly happens. By re-investing your dividends and maintaining a steadfast approach to your long-term investment, let’s see how much you could potentially accumulate over the next 10 years, in your 60s.

The result? Approximately ₹3.8 crores.

That’s the silver lining we’ve been talking about—the power of consistency and compounding working in your favor. By conducting regular performance audits and exploring opportunities for additional contributions, such as employee bonuses, you can maximize the potential returns on your investments.

It is worth noting that as you witness the fruits of your investment endeavors, your ambitions, and curiosity naturally flourish, granting you an advantageous position in terms of financial knowledge and insights.

This continuous growth and learning process propel you towards greater financial success and a deeper understanding of the intricacies of wealth accumulation.

Conclusion

By following a simple strategy, you have now discovered a method to build a substantial corpus for important goals like retirement. It’s important to consider the impact of inflation by increasing your monthly investment cap from ₹5,000 to a comfortable amount that aligns with salary adjustments driven by inflation.

Based on this no-frills calculation, a similar monthly investment of ₹10,000 has the potential to generate an impressive ₹7.5 crores, and this number continues to increase proportionally with the multiples you can comfortably invest in the equity markets.

In summary, the journey towards wealth accumulation begins with overcoming initial challenges and diligently accumulating the first crore. Embracing direct stock investing provides greater control and the opportunity for higher returns. Consistency, stillness, long-term commitment, and a deep understanding of the power of compounding are crucial for achieving financial goals. By adhering to sound investment principles, you can easily pave your way toward perpetual wealth generation and enjoy a brighter financial future.

Please note: This piece should be regarded as a case study rather than as investing advice. Please speak with a licensed “fee-only” financial advisor if you have any further curiosities.

Invest wisely!