It is everyone’s dream to become financially independent and build a sizeable corpus that will help them to retire peacefully without having to worry about money. I’m sure you also want the same.

If you are wondering how, you will be surprised if I told you that it is indeed possible to build a portfolio of not just Rs 1 crore but Rs 100 crores!

Though it sounds very surprising it is indeed possible. Let me tell you how to do it.

All you have to do is follow a very simple rule:

“Slow and steady wins the race.”

You can indeed build a large portfolio if you invest in a disciplined way and stay invested for a long time. Time has the capability to work like magic on financial investments. If you are patient and give your portfolio enough time, then time itself will create the purpose that you are looking for.

The Index Long Term Strategy that we have developed has given an incredible return of 18 – 20% per annum in the recent past. So let us take a reasonable return of 15% to understand how you can create a portfolio of Rs 100 crores.

But first, let us understand in how many years your money can be doubled if you can return at the rate of 15% per annum.

There is a simple rule called the Rule of 72 which makes this calculation really easy. It says that the number of years that your money will take to double itself is equal to (72 / rate of return earned).

According to this, if you are getting a return of 15% then your money will be doubled in approximately (72 / 15) years = 4.8 years, i.e., ~ 5 years.

So now let us come back to our discussion of how we can build a portfolio of 100 crores in 20 years.

Let us do some back calculation

• Since money is getting doubled in approximately 5 years, if we can accumulate Rs 50 crores within 15 years then and it can double to Rs 100 crores within 20 years.

• By the same logic if we can accumulate Rs 25 crores within 10 years then it can double up to Rs 50 crores within 15 years and again double up to 100 crores within 20 years.

• If you can gather Rs 12.5 crores in 5 years then it will double to Rs 25 crores in 10 years, Rs 50 crores in 15 years, and Rs 100 crores in 20 years.

• Today we can start investing with 6.25 crores, then it will grow up to 12.5 crores, 25 crores, 50 crores, and 100 crores in 5, 10, 15 and 20 years, respectively.

However, all this will be possible if three conditions are met:

1. 15% return should be generated continuously in the long term.
2. You must hold on to the portfolio patiently for 20 years.
3. You need to have a cash/portfolio of 6.25 crores to invest now.

What if you do not have 6.25 crores?

This is where the Index Long Term Strategy can help you. This is a beautiful strategy designed to help you to achieve your financial goals and be independent. We have created flexible payment schemes which are designed to help you to invest in a staggered way.

Imagine what happens when you buy property. Hardly anyone buys property by making a full down payment. They invest a part of the property value and take a loan for the rest. They know how much EMI they have to pay and all they have to do is to ensure that the EMI payment is made on time every month.

How much to invest?

In index long-term strategy we have developed a few payment plans which you can go for.

Plan 1: Basic Plan

Target portfolio: Rs 6 crores

Initial investment: 30%, i.e. You will have to invest Rs 1.80 crores now.

Yearly addition: Every year we incur a cost of ~8.50% on hedging and other fees. Therefore, you will have to pay approximately Rs 50 lacs annually from year 2 by cheque.

Plan 2: Power Booster Plan

If you already have a portfolio of bonds, equities or mutual funds of Rs.1.80 crores with you then you can go for this plan. You can provide this portfolio as collateral.

Yearly edition: every year you will have to add Rs 60 lakhs by cheque.

Therefore, if you have the capacity to invest Rs 50 – 60 lakhs every year, you can easily make a portfolio of Rs 6 crores.

The Index Long Term Strategy will ensure that your money grows steadily, and your portfolio also remains protected with the help of various hedging strategies.

Can you invest in ILTS if you have a smaller investment goal?

It is definitely possible. In that case, your yearly investment amounts will also be much lower.

For example, instead of Rs 100 crores if you are targeting only Rs 10 crores, then you will have to provide a cheque or portfolio worth Rs 18 lakhs now and then invest Rs 6 lakhs annually.

If this amount steadily grows by 15% per annum, then it will keep doubling every 5 years and become a portfolio of 10 crores within 20 years.

This entire thing is possible because of the magic of the compounding of money that will happen for 20 years.

In the first part of this article, we had discussed how it is possible build a Rs 100 crore portfolio in 20 years with the Index Long Term Strategy that has been developed by Finideas.

How long will you have to invest in ILTS

A big question that most of our customers ask us when we tell them about the Index Long Term Strategy is for how many years, they will have to keep investing in order to build a portfolio of 100 crores. Here we will try to answer this question.

We understand that the future is uncertain and while you can invest Rs 50 to 60 lacs today, it may not be possible to do it every year in the future. No one can say for sure what their financial position will be in the coming years.

Before we get to that let us understand another point.

Will Your Yearly Investment Amount Increase?

As you can see in both the Basic and Power Booster plans, we have said that you will have to invest 10% of your corpus every year. In that case will you have to invest more than what we have told you?

The answer is that yes, your payments will be more. But this enhanced amount will be funded from the profits that you earn from the portfolio in the scenario that the markets go up.

For example, consider the following situation:

• You had invested Rs 6 crores initially and now the portfolio value has gone to 10 crores.
• Therefore, you now have a profit of Rs 4 crores in your portfolio.
• The early payment will now be 10% of Rs 10 crores. But you can easily pay it from the profit of Rs 4 crores you earned. Hence, you will not have to pay it from your own pocket.

Cash Flow From Power Booster Plan

The problem with any investment happens when the market remains stagnant, i.e. If the nifty does not move much from its current levels. In that case how much will you have to pay and for how long?

To understand this, we did a back testing of our portfolio based on the following parameters.

• Exposure taken: 1,00,00,000
• Initial investment: 10%, i.e., Rs 10 lakhs
• Start year: 31/12/ 2002

The complete calculation of the cash flows generated from this investment is as follows:

• The first column in this table shows the last day of the financial year.
• The second column shows the level of Nifty on that day.
• The third column shows you that if you had invested the entire amount in nifty index fund without any protection, then your investment of Rs 1 crore would have become Rs 16 crores.
• The fourth column shows that if you would have invested the Rs 1 crore in the relax plan in the Index Long Term Strategy it would have become almost Rs 28 crores.

Hence this is much more beneficial then investing in the Nifty index fund as you will not have the risk of more than 3-4 % in any year in ILTS. Hence you can earn larger returns in the long term at a much lower risk.

• The fifth and sixth columns show what would have happened if instead of keeping Rs 1 crore in the Relax Plan, you would have chosen to invest:
• Rs 10 lacs in the Power Booster Plan of the Index Long Term Strategy and had also kept your portfolio as collateral.
• Your spouse invests Rs 90 lakhs in debt

Ideally the combined returns from this portfolio of 1 crore should be comparable to the returns from the relax plan of the Index Long Term Strategy.

As we all know the returns from the debt products is fixed. Hence you can see in the sixth column how the value of this investment would have grown at a fixed rate every year. Rs 90 lacs will grow to Rs 4.62 crores within 19 years.

You had also taken an exposure of Rs 1 crore by investing Rs 10 lacs in the Index Long Term Strategy. From the fifth column you can see that this amount has grown to Rs 23 crores in 19 years.

Hence your total investment has grown to you around 28 grows in 19 years.

The only problem that can happen in this scenario is if the market remains stagnant or falls. In that case you will lose your entire investment of Rs 10 lacs in the Index Long Term Strategy since you have paid this amount as a margin for taking an exposure of Rs 1 Crore. You need to understand this risk very clearly before investing in the index long-term strategy.

For How Long Will You Have To Pay The Installments Per Year?

As we mentioned earlier, if you invest and then market goes up then your next installment will be  funded from the profits that you will be earning from the investment.

The problem will happen if you invest in the market remain stagnant or falls after that. In that case you will have to pay the next installment from your pocket.

Here is what happened for people who have invested since 2002.

The cells marked in green are the years when the markets did not show a positive movement. As a result, the investors had to bring in fresh funds to pay for the maintenance charges.

For example, the markets remained stagnant in 2015 and 2016. So those who invested in 2014 had to bring in fresh funds to pay for the maintenance charges. However, those who invested in 2002, 2004, etc., paid only their initial funds and their after they did not have to pay anything further.

Hence the simple answer to this question is that like everything else in case of investments, the installment that you will have to pay for ILTS is also market linked. You should enter the Power Booster Plan only if you can pay the installments for the next five years.

In conclusion it can be said that the secret to behind the success in Index Long Term Strategy is patience. Give your investments enough time to grow, remain invested patiently and you will surely be able to build a portfolio of Rs 100 crores in 20 years.

Happy Investing!

This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.