Rashid Khan

IIPM, GURGAON

I’ll become a millionaire one day! Hi, my name is Rashid Khan and I am working as an event manager with Sahara India. I have almost seven years’ experience in the field of event management and want to do something great in my chosen vocation on my own. My annual pay package is Rs.6-7 lakhs per annum.

“But pay packages won’t help me achieve my dream of becoming a millionaire,” says the rugged Rashid Khan. At the age of 28, Rashid wants to make it big in his sector. “Starting a business of my own is not easy, and requires a lot of efforts and of course money,” says Rashid in a mellow, yet confident voice. “I plan to get a corpus of Rs.30-40 lakhs after five years. I think investments in mutual funds and other equity instruments will not suffice, that is why I am looking for an investment that will be an asset for me.” Rashid feels that investing in property (real estate) would be the right way to go. At present, he has invested Rs.1 lakh (premium) as tax saving in LIC and says that all his future investments should be such that they are asset-based. “That way, I could use the proceeds for realising my dream of having an establishment of my own, which will then mint moolah for me,” he explains.

Yes, it is difficult to become a millionaire just by working hard for others. In fact, until you work for yourself or put your money to work hard for you, it is next to impossible. All the self-made billionaires in history have either been entrepreneurs or else prudent investors. But, even to become an entrepreneur, you need initial capital. So the first step in getting rich is to create wealth by investing your savings from your regular pay-cheques judiciously.

Wealth creation is a game of discipline and patience. Instead of ad hoc investing, you should create a road map (a concrete plan) for wealth creation. This should be done by taking into account your time horizon and risk appetite and then by investing regularly in a disciplined way. Return on your capital is a function of proper asset allocation and the time period you stay invested. Diversified asset allocation provides stability to your portfolio returns and ‘time’ helps your investments grow with a compounded effect.

To accumulate a corpus of Rs.30-40 lakhs in five years, being a salaried person, you should save and invest about Rs.30,000-35,000 per month through systematic investment plans of Diversified Equity Mutual Funds. Real estate investment is for lump sum investors and may be relatively volatile in a medium term horizon of five years.

(Views expressed above are by: Ramesh Dalal, CFP, MBA, Associate Vice President-Financial Planning Group, Bajaj Capital Ltd.)

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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