Case Study: From Modest Beginnings to Financial Abundance

Date 09 July 2024

Introduction

Many young professionals find themselves striking gold early in their careers. At 25, they land high-paying jobs and often start thriving businesses soon after. With a steady stream of income, they embrace lives of luxury and enjoyment, spending lavishly on gadgets, vacations, fine dining, and nightlife. The thought is always, “I have plenty of time to save and invest later.”
This lifestyle reflects the classic tale of the Rabbit and the Tortoise. These young professionals believe their financial success is secure and that savings can wait. Each month, their pay checks disappear as quickly as they arrive, funding their high-spirited lifestyles.
In contrast, let’s look at Mr. Ramesh’s story. Despite not having much, he chose to invest systematically, sacrificing small enjoyments by investing just ₹10,000 each month in equity mutual funds. By doing so, he achieved financial freedom by the age of 55. His disciplined approach serves as a powerful illustration of how early and consistent investing can lead to a secure and prosperous future.

Year 1-10: High-Risk Investments

Age 25-35:

• Initial Investment: ₹10,000 per month in high-risk options like stocks and equity mutual funds.
• Reason: With a long investment horizon, Ramesh can afford to take higher risks for potentially higher returns.
• Outcome: Averaging an annual return of 15%, his investment grows significantly.

Investment Growth:

Total Investment: ₹10,000 x 12 months x 10 years = ₹12,00,000

Estimated Corpus: With an average annual return of 15%, the corpus grows to approximately ₹27,00,000.

Year 11-20: Balanced Investments

Age 35-45:

• Investment Shift: Ramesh begins to diversify into balanced mutual funds, real estate, and gold.
• Monthly Investment: ₹10,000 per month in balanced options.
• Continued Investment of Initial Corpus: ₹27,00,000 from high-risk investments reinvested in balanced options.
• Reason: To balance risk and ensure steady growth while safeguarding against market volatility.
• Outcome: Averaging an annual return of 10%, his investments continue to grow steadily.

Investment Growth:

• Monthly SIP: ₹10,000 x 12 months x 10 years = ₹12,00,000
• Growth of SIP: With an average annual return of 10%, the new SIP corpus grows to approximately ₹19,00,000.
• Growth of Initial Corpus: ₹27,00,000 grows to approximately ₹70,20,000 with a 10% return over 10 years.

Total Corpus After 20 Years: ₹70,20,000 + ₹19,00,000 = ₹89,20,000

Year 21-30: Moderate Risk Investments

Age 45-55:

• Investment Shift: Focus shifts to debt mutual funds, fixed deposits, and bonds.
• Monthly Investment: ₹10,000 per month in moderate-risk options.
• Continued Investment of Initial Corpus: ₹89,20,000 from balanced investments reinvested in moderate-risk options.
• Reason: Prioritizing capital preservation and steady returns as retirement nears.
• Outcome: Averaging an annual return of 7%, the investments continue to grow at a stable rate.

Investment Growth:

• Monthly SIP: ₹10,000 x 12 months x 10 years = ₹12,00,000
• Growth of SIP: With an average annual return of 7%, the new SIP corpus grows to approximately ₹16,00,000.
• Growth of Initial Corpus: ₹89,20,000 grows to approximately ₹1,75,00,000 with a 7% return over 10 years.
• Total Corpus After 30 Years: ₹1,75,00,000 + ₹16,00,000 = ₹1,91,00,000

Final Corpus Fund
Combining the growth from all three phases, Ramesh’s total corpus fund is approximately ₹1,91,00,000.

Conclusion

Starting with modest investments and a clear strategy, Ramesh successfully grew his corpus fund to ₹1,91,00,000 by the age of 55. His disciplined approach to investing, shifting from high-risk to balanced and moderate-risk options, allowed him to build a substantial nest egg. Now, Ramesh has the financial freedom to pursue his dreams, whether it’s starting a business, traveling the world, or securing his family’s future. This case study illustrates the power of strategic investing and the importance of adapting investment strategies to different life stages.