I am a student of class 10th and I want to be a
millionaire by the age of 30
A real life practical case for me …. And happy to be
associated with Mr XXX.
“My name is XXX, and I am a student of class 10th
today and 15 years old. I am good in studies, financially comfortable but not
rich and hopefully I will do well in life. But my future I don’t want to leave
on fate or kismat so I want to plan now and I have set my target to become a
millionaire by the age of 30 yrs.
Today my pocket money is Rs 1500 per month and I will
consider that as my income available to me per month. I don’t do anything else
besides studies and aiyashi with friends. But I have decided to change that and
become rich in future. But considering the importance of studies in class 10th
and beyond I will not be doing anything else. So how do I start the process to
reach my goal?”
To begin with it was good to meet Mr XXX in one of our
friendly circle and is intense sincerity and focus forced me to help him plan
things to start the journey towards his target. One of the major factor I guide
people is that they should not get fixated by financial targets, I mean that
one has to live life so one must not start saving so much that you stop living
life.
So we decided that an amount of Rs 500 for savings and Rs
1000 for his general expenditures per month is a worthwhile figure to start
with.
Now with age on side of Mr XXX being so young and no
practical financial liabilities in near future we decided to invest in the equity
market to capitalize on the growth potential. And we started the investment in
a “Z” mutual fund. Since we had only Rs 500 to invest per month hence we
started a SIP of Rs 500 per month. The mutual fund was a large cap fund with
growth oriented scheme. We continued in this fund for roughly 5 years. In the
above period we had invested ( 500x12x5) ie; Rs 30,000 through SIP. Also in
addition Mr XXX whenever he got some additional money like a relative visiting
and giving him Rs500-1000, was also put in the scheme roughly totaling to Rs
10,000 in these 5 years. So our total invested amount was roughly Rs 40,000 in
5 years.
In these 5 years his investment of Rs 40,000 had slowly
grown to Rs 3,20,000 or Rs 3.2 Lacs. And in these 5 years he had reached his 3rd
year of BTech and was comfortably pursuing his studies. His pocket money had
also changed from Rs 1500 to Rs 5000 but his monthly expenditures also had
increased from Rs 1000 to Rs 3000 catering for Bike, girl friends and project
files in college.
Though we had been tracking his saving all through these
years but it is at this time we decided to change the tactics and review our
plans.
By now Mr XXX had also started understanding the concept of
equity investment and the potential to grow with minimum risk in the longer
timeframe, with all the ups and downs in the market and there inherent cost
averaging and neutralizing effect of SIP investments.
Now, we decided to increase his investments up to Rs 2000
per month and change our tactics to also utilize the growth potential of mid
cap equities available. So we chose two funds now. One a large cap and second a
mid cap fund. After withdrawing the Rs 3.2 lacs in his portfolio we invested lump
sum Rs2.0 lacs in another large cap fund based on current market situation and
Rs 1.2 lacs in a Midcap fund. Then we started a SIP of Rs 1000 per month each
in both the funds. And we decided to monitor and continue this for another 5
years.
That India was growing was an additional booster to our plan
at that time.
In next 2 years he graduated and got a BTech and a good job offer with a starting salary
of Rs 20,000. Though against my advice he choose to take the job and start his
independent life. In the meantime his initial investment of Rs 3.2 Lacs and
SIPs of 2 years ie; Rs 24000 had in total grown up to Rs 4.1 Lacs.
The income from job forced us to sit again and decide our
future course of action.
Out of the Rs 20,000 of his salary his monthly expenditure
including rent and everything was about Rs10,000. He also wanted to give Rs
5000 per month to his parents which was a welcome thought, so we now had Rs
5000 per month for investment.
The funds we had chosen were performing good so we decided
to increase the SIPs in the same funds from Rs 1000 to Rs 3000 in the Large cap
per month and from Rs 1000 to Rs 2000 in the midcap fund per month.
By now he was a 22 years of male with a monthly income of Rs
20,000 and an equity portfolio of Rs 4.1 Lacs and monthly investment of Rs 5000
in equity through SIP.
He continued with his
job for next 3 years and his salary increased from Rs 20,000 to Rs 32,000 and
so our monthly saving from Rs 5000 to Rs 7000 per month ie; we increased the
SIP amounts as we progressed.
That is when I could convince him to leave job and do an
MBA. When we took stock of situation, by now in 3 years he gad got hang of the
industry but needed to take the jump to through an MBA to boost his career. At
first we took the proposal through his HR of the company and lucky for him the
company agreed to finance his studies thus relieving him of the expenditure.
But with no regular pay or income he needed some money
monthly to fund his personal expenses. Hence we again sat down to review his
portfolio which had in the meantime slowly grown to Rs 14.0 Lacs. The funds
were performing well but for next 2 years we had no source of income and a
monthly personal expense of approximately Rs 5000.
So we redeemed his portfolio and withdrew his capital of Rs
14.0 Lacs and invested Rs 13.0 Lacs lumpsum in a monthly income plan from which
we conservatively expected an income of around 12% per annum paid out monthly to
cater for his monthly expenses plus Rs 1.0 Lacs left for his immediate expenses
on joining.
Further we also put in place a systematic withdrawal plan to
continue his SIP in an Index fund through ETF to derive the benefit of growth
in the industry and market but largely keeping his investment safe.
Thus not only he was getting a monthly payout like a Fixed
Deposit but also through SIP was able to participate in growth of the market
and losing out during his non earning years while studying.
In next 2 years he completed his MBA and negotiated a job at
approximately Rs 60,000 per month as a management trainee in the same company.
His investment also had grown to approximately Rs 16.0 Lacs inspite of catering
for his monthly expenses due to the SIP in the Index fund.
By now at the age of 27 years, he had got the hang of the
possibilities of creating wealth safely through the equity market. However, he
was impatient to reach his goal which was still far away. With Rs 16.0 Lacs in
account and a saving of Rs 30,000 per month from his salary he was ready to
take the plunge into direct equity ie; share market. After his MBA he had
become more aware of the market conditions, profiling companies and
sectors. At first we started with his
monthly saving of Rs 30,000 and initiated three SIPs of Rs 10,000 each in one
Large cap and two Midcap funds. Then with his capital of Rs 16.0 Lacs we purchased
shares of HDFC ( 500 nos for Rs 400 each), ITC ( 1000 nos for Rs 160 each), TCS
( 200 nos for Rs 1600 each), Bharati ( 1000 nos for Rs 170 each) to highlight a
few and some others for a total of Rs 16.0 Lacs in next six months.
In next three years his salary increased to Rs 80,000 per month.
He also purchased a 2 bedroom house for Rs 20.0 Lacs through home loan and
married also. Though we could not increase his investments in SIP but he held
fast to it and did not disturb it either. The increase in salary catered for
his increased expenses and EMI.
Today at the age of 30 years we sat down together to analyze
his portfolio and how far we progressed towards his goal. His portfolio in
mutual funds with his investment of Rs 10.8 Lacs had grown into Rs 14.0 Lacs.
His investment of Rs 16.0 Lacs in shares had grown to Rs 22.0 Lacs and the
value of his house had grown to Rs 28.0 Lacs. Thus the total value of his
assets were Rs 64.0 Lacs though the house was on loan.
So at the age of 30 years though he could not achieve the
magical financial figure to be called a millionaire but he was definitely a
financially secured man confidently moving ahead and far better than his pears.
May be a millionaire in his own ways or very sure to reach there in next 10
years.
Happy Investing
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