Want to be a crorepati ?

It may sound a bit ridiculous, but believe me, it may be amazing and true. No, you don't have to buy lottery tickets or answer tricky questions at the HOT SEAT in front of Mr Bachchan !!

The simple way is nothing but starting early and bear a little bit of risk.

Start investing as early as you can. The ideal time may be the time as and when you start earning income. As early as you can start investing, the savings burden will be lower for you. Just invest a little portion of your earning every month over a long period of time and you will be amazed to see the outcome !

A monthly savings of Rs 2681 for 30 years with a moderate 12% return may turn to Rs 1 crore rupees, yes, 1 crore. And if the return is calculated @ 15% per anum, the monthly investment requied is only Rs 1444.

Don't have that much time ? OK. Just invest a little above Rs 6500 per month for 20 years, your wealth will be 1 crore at a yearly return of 15%.

 This is called the power of compounding. But the million dollar question is where to invest the amount. That depends about your risk bearing capacity. Over different asset classes, it is seen from the history that stocks can give maximum amount of return in a long horizon. Of course, the return may be volatile in the shorter duration but historically, it yields maximum among different assets. Yes, taking into account of the precious yellow metal also. See the chart below.

Nature of Investment	% Returns after 5 Years	% Returns after 10 Years
Real Estate	30%	14%
Gold	10%	7%
Bank FDs	8.50%	12.50%
Equity	35%	16%

Figure represents of the year 2010.

But the problem in investing in stock is the selection. It is very difficult to select the RIGHT stock to invest. A lot of things to be monitored like EPS, PE ration, dividend history etc to be carefully analyzed to select a real good share. I advise that if you don’t have the time and expertise to analyze these things, why not leave it to professionals ? Yes you guessed correct! I am talking about the mutual funds who can manage your money in a better and professional manner. Moreover having the knowledge and expertise about the stock market you can hardly buy even a handful of quality shares with your monthly savings. But if you invest systematically in a mutual fund, your purpose is achieved. Moreover, you can never time the market. Even the master of this field can not predict the ideal time for investment in stock.

If the investment is made monthly, the rupee cost averaging is there. That means when the market is up your investment value yields and in the contrary when it is down, your unit number appreciates. So you are beneficial in both ways.

Which mutual fund to invest ? We will talk later about this. Till then, Good Bye, Happy Diwali!!!!