Can I double my portfolio to ₹1 crore in two years? | Mint

I am 28 years old and have a portfolio worth ₹47.4 lakh, comprising ₹36.5 lakh in equities and the rest in mutual funds. I regularly invest ₹25,000 per month via SIPs, with a 10% annual increment in these contributions. With no liabilities, I am considering investing an additional ₹10 lakh, either in similar instruments or diversified options. My goal is to grow my portfolio to ₹1 crore by the time I turn 30. How can I achieve this? 

-Name withheld on request

At 28 with a ₹47.4 lakh portfolio and a disciplined investment approach, you’re well on your way to financial success. Your goal of reaching ₹1 crore by 30 is ambitious, but achievable with a strategic approach.

Equities are powerful wealth creation tools but are inherently volatile in the short term. Setting a two-year target for ₹1 crore makes the outcome heavily dependent on market performance, which is beyond your control. 

If markets perform exceptionally well, you may reach your target, but the case of underperformance or stagnation, achieving a portfolio of ₹1 crore in two years may not be realistic. 

Read this | What you need to know about RBI rules when investing abroad

Instead, focusing on a long-term strategy with appropriate asset allocation and compounding will set you up for sustained wealth creation. 

Steps to grow your portfolio 

Leverage the power of time and compounding: Long-term investing allows compounding to work effectively. By consistently investing over 5-10 years or more, you can potentially exceed the ₹1 crore target. 

Focus on investments with strong growth potential, such as equities and equity mutual funds, while maintaining diversification to manage risks. 

Align asset allocation: Given your young age and time horizon, retaining a significant allocation to equities is ideal. However, diversify across large-cap, mid-cap, and small-cap funds to balance returns and risks. 

Debt for stability: Include 20-30% in debt instruments (debt funds, government bonds) to reduce portfolio volatility.

Hybrid instruments for balance: Consider balanced advantage funds or hybrid mutual funds that combine equity and debt, reducing the impact of market fluctuations. 

Invest the additional ₹10 lakh wisely: Avoid investing the entire amount in equities immediately, given market unpredictability. 

Use a Systematic Transfer Plan (STP) to move funds into equity over 6-12 months, reducing timing risks. Alternatively, split the amount between equity (e.g., 60%) and debt (e.g., 40%) to strike a balance. 

Increase monthly SIPS gradually: Incrementally raise your SIP contributions to ₹35,000 or more, considering your income growth. Regular investments, even in smaller amounts, compound effectively over time. 

Review your portfolio’s performance annually and rebalance it to maintain alignment with your goals and risk tolerance. If equities outperform in a particular year, consider shifting some gains to debt or hybrid funds to lock in returns. 

Maintain an emergency fund: Keep 6-12 months of living expenses in an easily accessible fund to avoid withdrawing from your investments during emergencies. 

Also read | Santosh Kamath of Franklin Templeton MF is back with a new credit alternative investment fund

Investing is a long-term journey. While short-term goals are motivating, prioritize a well-diversified portfolio and consistent investing. This approach will not only help you achieve your ₹1 crore goal but also build a strong foundation for long-term financial success.

The responses are given by Nehal Mota, co-founder of Finnovate.