Smartly Investing 6 Crores In India: A Comprehensive Guide

Investing 6 crores in India requires a sound financial plan and discipline to achieve the desired results. While it is a significant amount, careful planning is necessary to make the most of it. This involves considering factors such as initial investment, annual returns, and duration. One popular approach is the Systematic Investment Plan (SIP), which involves contributing a fixed amount at regular intervals. The 15-15-15 rule, for instance, suggests that investing Rs. 15,000 per month for 15 years with a 15% annual return will yield Rs. 1 crore. For a higher target of Rs. 10 crores, a longer duration or a combination of SIP and lump-sum investment may be considered.

Systematic Investment Plan (SIP)

Systematic Investment Plans (SIPs) are a smart and simple way to invest in India. SIPs are a type of mutual fund investment strategy that allows you to invest a fixed amount of money at regular intervals – be it weekly, monthly, or quarterly. This disciplined approach to investing helps you grow your wealth over time and achieve your long-term financial goals.

Flexibility

SIPs offer flexibility in terms of investment amounts and frequency. You can start investing with a small amount, such as Rs. 1000 per month, and there is no upper limit on contributions. You can also choose to invest at intervals that suit your financial situation and comfort level.

Rupee-Cost Averaging

SIPs utilise rupee-cost averaging, which means that you invest the same amount at different market conditions. Sometimes you buy when prices are high, and other times when they are low, averaging out the cost over time. This takes the stress out of trying to time the market and reduces the impact of market volatility on your investment portfolio.

Power of Compounding

SIPs benefit from the power of compounding, where your returns are reinvested, leading to exponential growth over time. The earlier and longer you invest, the more your money grows, making SIPs ideal for long-term financial planning.

Disciplined Investing

The nature of SIPs encourages regular, disciplined investing. By setting up automatic contributions, you can ensure that you consistently build your wealth over time, without having to remember to make manual investments.

Professional Management

When you invest in a SIP, your funds are managed by experienced professionals who select and manage stocks and assets to maximise your returns. This reduces the risks involved in your investments and allows you to benefit from their expertise.

Tax Benefits

SIPs also offer tax advantages in India. Investments in certain SIPs are eligible for tax deductions under Section 80C of the Income Tax Act, and the maturity amount from your investments may be tax-free under Section 10(10D) if certain conditions are met.

In conclusion, Systematic Investment Plans (SIPs) are a smart, flexible, and disciplined way to invest in India. By utilising rupee-cost averaging and the power of compounding, SIPs help you build wealth over time, making them ideal for long-term financial goals. With the added benefits of professional management and potential tax advantages, SIPs are a popular choice for investors seeking a simple and efficient investment strategy.

Mutual funds

SIPs help to mitigate market volatility. When the markets are down, continuing the SIP allows investors to benefit from buying more fund units at a lower price. When the markets are up, fewer units are purchased. This is known as rupee cost averaging.

To accumulate a corpus of 6 crores, one would need to invest substantial amounts through SIPs. For example, to accumulate 6 crores in 20 years, one would need to invest around Rs. 60,000 every month, assuming an annual return of 12%.

For moderate-risk investors, investing in large-cap funds or hybrid aggressive funds could be a good choice. Large-cap funds are suitable for investors who want exposure to equity but are conservative risk-takers. Hybrid funds offer better returns than debt but are safer than equity, making them suitable for low-risk investors and those investing for a short to medium duration.

Some recommended mutual funds for lump-sum investments include Canara Robeco Small Cap Fund Regular, Canara Robeco Equity Tax Saver Regular-IDCW, Parag Parekh Flexi Cap Fund, and Kotak Small Cap Fund.

It is important to assess your risk profile and investment horizon when considering mutual funds. Additionally, financial discipline and selecting the right investment options are crucial in achieving your financial goals.

Lump-sum investment

When investing a lump sum, it is crucial to consider your investment goals, risk appetite, and time horizon. Here are some popular lump-sum investment options in India:

Mutual Funds

Mutual funds are a diversified investment option where professional fund managers invest in different securities, such as stocks and bonds, depending on the fund's objective. Mutual funds are available in various categories, including equity funds, debt funds, and hybrid funds, catering to different risk profiles and investment objectives. When investing in mutual funds through a lump sum, it is important to assess the fund's performance, diversification strategy, fund manager's expertise, expense ratio, and exit load.

Fixed Deposits

Fixed deposits are a safe investment option that offers a fixed rate of interest over a specified period. They are provided by banks and non-banking financial companies (NBFCs) with different tenures and interest rates. Fixed deposits are suitable for those seeking assured returns without the risk associated with other investment options.

Equity Shares

Equity shares are a high-risk, high-return investment option for those wanting to invest in the stock market. They provide ownership in a company and the potential for higher returns. However, investors in equity shares should have a long-term investment horizon and a high-risk tolerance due to the volatility of the stock market.

Public Provident Fund (PPF)

PPF is a government-backed investment scheme that offers tax-free returns and a fixed rate of interest. It is a popular option for retirement savings, with a lock-in period of 15 years and an annual investment limit of Rs. 1.5 lakhs.

Real Estate

Real estate investing provides the potential for capital appreciation and rental income. It is a high-risk, long-term investment option that requires a substantial amount of capital. Fractional real estate investment is also an option, allowing investors to own a part of a commercial property with a smaller lumpsum amount.

Other Options

Other lumpsum investment options include fixed-income products, structured products, PMS & AIF (for investments above Rs. 50 lakhs and Rs. 1 crore, respectively), and systematic investment plans (SIPs) for those who want to stagger their investments over time.

It is always recommended to consult a financial advisor to assess your specific circumstances and goals before making any investment decisions.

Equity funds

• Franklin FTSE India ETF
• IShares MSCI India Small-Cap ETF
• VanEck India Growth Ldrs ETF
• IShares MSCI India ETF
• Columbia India Consumer ETF
• WisdomTree India Earnings ETF
• Wasatch Emerging India Fund®
• Eaton Vance Greater India Fund
• ALPS/Kotak India ESG Fund

Fixed-income instruments

There are various fixed-income instruments available in India, each with its own features and benefits. Here are some of the most common types:

• Fixed Deposits (FDs): FDs are one of the most popular investment options in India, offered by banks and other financial institutions. They offer a fixed interest rate on the principal investment for a predetermined period, usually ranging from 7 days to 10 years. The interest rate is higher than that of a regular savings account and is fixed at the time of deposit. FDs provide flexibility in terms of investment tenure and are considered a secure investment option.
• Government Bonds: These are debt instruments issued by the Central and State governments to finance their needs and regulate money supply. Government bonds are backed by the Government of India and are considered a risk-free investment option. The interest rate offered can be fixed or floating, and the duration of these bonds ranges from 5 to 40 years. Government bonds are suitable for investors with low-risk tolerance levels who prioritise security.
• Corporate Bonds: Corporate bonds are issued by companies to raise capital from investors at a fixed interest rate for a set period. The risk associated with corporate bonds depends on the issuer's creditworthiness, financial stability, and ability to repay the debt. They provide superior return opportunities compared to FDs and government securities.
• Public Provident Fund (PPF): PPF is a government-backed investment cum tax-saving instrument in India. It offers guaranteed returns and is accepted by select nationalised and private banks. The interest rate is fixed by the government, and the account has a lock-in period of 15 years, which can be extended. Investments in PPF accounts are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.
• National Savings Certificate (NSC): NSC is a post office savings scheme offered by the Government of India to encourage small and mid-income investors to save. It offers a fixed interest rate during the tenure, with a minimum investment amount of INR 100 and no upper limit. The scheme has a lock-in period of 5 years, and investments qualify for tax deductions of up to INR 1.5 lakhs under Section 80C. However, it is only available to resident individuals and not Non-Resident Indians (NRIs).
• Senior Citizen Savings Scheme (SCSS): SCSS is another post office savings scheme backed by the Ministry of Finance, Government of India. It is a low-risk investment option suitable for senior citizens aged 60 years and above. The scheme offers a regular income at low risk and provides tax benefits under Section 80C. The interest income, however, is taxable under the head 'Income From Other Sources'.

When investing in fixed-income instruments, it is important to consider factors such as duration, liquidity, tax savings, and safety. These investments typically have a specified investment period, and early withdrawal may result in penalties. Additionally, compare the tax implications of different instruments, as some offer tax exemptions or deductions. While fixed-income instruments are considered lower-risk, it is important to remember that all investments carry some level of risk.

Frequently asked questions