Create Your First Million
Most people get intimidated by the very thought of Investing! It can be complex, challenging and confusing in equal measure. At Ortium, we believe that this need not be the case. Hence we created “My First Million”. “My First Million” is a goal and a journey. The goal is to get to your first million and the journey is to become a better investor.
Here is your step by step guide to make your first million. You can make use of the interactive calculator that can be helpful to customise your journey towards your first million.
Step1. Define the target amount
In our experience, setting a goal can be a difficult exercise for many investors. We have made the decision for you by defining the target of Rs 10,00,000 (One Million)! But if you would like to set a different goal for yourself, please go ahead and do so! All we are keen to accomplish is that you have a goal which you can work towards.
Step 2. Select the time frame in which you would like to accomplish your goal
Your time frame will directly impact the amount you need to save and the investment choices that you make.
Let us take a simple example to illustrate this. Suppose you set yourself a target of reaching your first million within 2 years. To accomplish that, you will need to save Rs.40,000 per month. You will also have to invest primarily in debt funds/ safe products as equities can be very volatile and risky in the short term.
Conversely if you decide that you want to reach your goal of a million in 5 years, you need to save just Rs.13,000 per month. You can also invest a large part in equities as your goal is 5 years away and get a higher return.
Step 3. Understand Investment choices
As an investor, the choice you have to make is what proportion of your investments should be in risky assets (Equity Mutual Funds and shares), and what proportion should be invested in low risk/ Risk-free assets ( debt mutual funds, Bank FDs, PPF, etc).
If you invest in low risk investments, you are likely to generate a lower return and it will take you a longer time/ higher amount of savings to reach your goal. Safe investments include bank deposits, PPF, some Insurance products and Debt funds.
If you invest in riskier investments, you could potentially generate a higher return, but there is always a chance that you might lose your original investment. Riskier investments include Equity Mutual funds and shares.
Understanding this risk-return tradeoff is important before making any investment choice. If you are just starting off, ideally invest 50% in both categories, and readjust as and when you build some comfort.
Step 4. Execute
This is where most people hesitate. What if you make a wrong investment choice? Well to make a right or wrong investments choice you first need to make an investment. Start small if you aren’t sure, but only if you start will you be learn and improve yourself as an investor.
Next Steps
I hope this step by step plan and the calculator helped you gain clarity on how you can create your first million!
At Ortium, we are committed to help individuals meet their Financial Goals and would be delighted to put together a savings plan for you that will help you reach your first million! Please feel free to write to us and schedule a discussion.
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