How to get rich in India – Things to do and things to avoid

Everyone wants to get rich. Whether we say it or not, most of us wish to have that extra cash to be able to fulfil our dreams. Be it for travel, to buy our dream car or that luxury pent-house and whatnot. But, we don’t want to put effort. We are lazy. We just wait for a magic to happen that will make us rich. At least that’s what our actions reflect. 

Why we don’t get rich? Because we want to get rich quick!

Its alluring to hear about schemes that can help in making money quickly. We invest there, lose our money and hope and then we go back to a normal life. But, it doesn’t have to be that way. Your hope shouldn’t die. It doesn’t matter if you are intelligent or dumb. If you give time to think and understand what you’re going to read in this article, you will be able to take charge of your life and retire rich. But, you have to be disciplined and patient.

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Moreover, you’re not going to become a millionaire overnight, or even in 1 or 2 years. But, you will be able to retire rich. The only criteria is that you should be earning at least Rs. 25,000 and be able to save at least Rs. 10,000 every month for the next 30 – 40 years. If you don’t think you can hang on to this discipline for the said time you may stop reading now.

Fastest way to grow wealth and get rich : Start your own business

Fastest and most predictable way to grow wealth and get rich is to start your own business. It also gives you active control over your capital and mental satisfaction if you’re really passionate about the work. But if the bumpy ride that a businessman has to go through, gives you goosebumps, you should probably stick with your job. Moreover, if you’re not passionate about your business it’s highly likely to fail. But, all is not lost for those who don’t want to do business. You can still get rich, but you’ll have to be disciplined and patient. 

Wealth destruction: We block our money in insurance schemes

Do you have an insurance? Which insurance plan do you have? Endowment? Or Term? Wait, you probably don’t even know which type of insurance you have! The biggest mistake we make with an insurance is by taking an endowment plan. How? Let me explain. Do you know the meaning of insurance? Go ahead, google it and come back. 

So, insurance is a protection, a hedge against the loss caused to your family due to your death. But, with endowment plan you pay the premiums and after a certain time, if you’re still alive you get your money back along with some extra change. But, if you die, your family gets the same money with little extra change and they’re sad now. They don’t know what to do. 

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On the other hand, with term insurance, you actually pay premiums for a certain period of time eg. 25 – 30 years and within that time frame, if you die, your family gets enough money which, if they put in the bank FD they can actually replace your income. 

Why term insurance and why not endowment?

I’ll give you a very simple answer. Term insurance is the real insurance, but endowment is just an insurance plan for people who aren’t willing to lose their money in the term insurance. I’ll explain how.

Endowment Plan has two components. First is the insurance component which goes towards securing your life, hence to cover the premium. Next, we have the investment component which goes towards investment into asset classes like debt and equity. 

Depending on the plan you’ve chosen the insurance companies would invest in the suitable asset class and share the earnings with you. 

Now let’s talk about Term insurance which only has the insurance component that goes towards securing your life. So, premiums of term insurance plans are much cheaper than endowment plans.

Apart from those, both insurance plans have to give some commissions to the agent who brought business to them, but in the case of term insurance the commission is very low. That’s why you’ll not find many insurance agents who recommend term insurance.

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Now the catch: in term insurance if you’re alive even after the term is over you get nothing. No money at all. But, in endowment plan after the term is over or according to the plan you get some money. This money comes from your investment component and your money in the insurance component is still lost here. But, you’d still get more money than what you paid in premiums because your investment component’s gains would’ve compensated for the loss of term insurance component.

You may be wondering where is the problem and even that I’m probably crazy for asking you to go for term insurance where you’ll lose your premiums if all goes well. But, you lose your term insurance money even in the endowment plan. It is compensated for by the gains in your investment component hence you’re unable to see it.

So, what should you do? Instead of giving away your investment money to Life insurance companies, try giving it to Asset Management Companies. The benefits, you ask? Job of asset management companies is to invest on your behalf to reach a specific goal with calculated risk. Let the best man do their respective jobs and leave Life insurance in the hands of Life insurance companies, and investing to asset management companies.

Wealth Plan including risk management

Let’s say you’ve decided to get rich slowly. You have taken a term insurance to hedge against your accidental death. Now what? Is there some numbers, some figure which you can see to get an idea as to how much money you’ll end up with? Yes!

Even if you save Rs. 10,000 each month for 25 years you can end up with more than Rs. 1 Crore. There’s a catch though. You have to keep increasing this amount by 2% each year.

Let’s do the math: Divide the amount you want to save (Rs. 10,000) by 2 and save half into bank FD and rest to Mutual Funds. If you start at the age of 25, then at the age of 60, you’ll have:

  • About Rs. 88 Lakh in Bank FD. (Interest Rate of 6%)
  • About Rs. 3 Crores in Mutual Funds (CAGR of 12%)
  • You were investing/saving Rs. 10,000 each month in the beginning. But at the age of 60 you’ll be investing/saving about Rs. 20,000 each month. (2% increase year over year)
  • Over these 35 years you’d have invested about Rs. 60 Lakhs in total. (Bank FD and Mutual Fund investments combined)

Here’s a graph to show you how much you can make in Mutual Funds alone:

get rich in India mutual funds
X- axis represents years of investment. Mutual Funds wealth graph.

Looking at the graph, you can clearly see the power of compounding. To earn Rs. 1 Crore it takes about 25 years. But once you have that, it only takes 10 years to earn another 2 Crores.

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What do you think about the number? Is it enough to retire? Is it not enough?
Well, at this point in time you can safely take out Rs. 1 Lakh from your Mutual Funds account each month for the rest of your life and still have plenty left for your family at the time of your death.


Not only that, you can also keep increasing your withdrawal amount by 5% each year. Let’s have a look at your estimated portfolio after 40 Years, when you’re 100 years old. You’ll have:

  • About Rs. 5.6 Crores in Bank FD. (Interest Rate of 5%)
  • About Rs. 39 Crores in Mutual Funds. (CAGR of 10%)
  • You withdrew Rs. 12 Lakhs annually in the beginning, but by the age of 100 you’ll be withdrawing Rs. 80 Lakhs annually or 6.66 Lakhs monthly. (5% increase year over year)
  • Over these 40 years, you’d have withdrawn about Rs. 14.5 Crores.

Have a look at this graph to understand how much you’ll have left after withdrawing close to Rs. 15 Crores:

get rich in India grow wealth age 100
X- axis represents years of investment. Mutual Funds wealth graph.

Unhappy about increasing the investment amount by 2%?

Though I’d suggest increasing the investment amount by 2% annually, You can still get good results by following this alternate route below.

Simply divide the amount by 2 and save half into bank FD and rest to mutual fund, like before. You’ll end up with Rs. 33.97 Lakhs in bank FD (after interest @ 6%) and Rs 85.11 Lakhs in Mutual Funds (CAGR of 12%). That’s a total of about Rs. 1.19 Crores. 

Let’s say that you started at age 25. Now you’re 50. You can work for another 10 years. But, in the last 25 years, inflation has made things costlier and so your salary should also have seen a hike. Now, you have to double your investment amount for these 10 years. Previously you deposited Rs. 10,000, now you will deposit Rs. 20,000 each month.

By the end of 10 years, you’ll have Rs. 65 Lakhs in bank FD (Interest @ 4%) and Rs. 2.4 Crores in Mutual Funds(@ 10% CAGR).

Not enough to retire on? Fine. Let’s do more math. Now, you start taking out Rs. 1,00,000 from your mutual fund savings each month. Don’t touch the Rs. 65 Lakhs bank FD. That’s your emergency fund. But, don’t stop there. Go on increasing your withdrawal rate with inflation. (@5%) By the end of 40 years (when you will be 100 years old), you’d be taking out 80 Lakhs per year (6.66 Lakhs per month) and still have Rs. 11.99 Crores in your Mutual Funds account. This is apart from your emergency fund in bank FD which would’ve grown to about Rs. 3 Crores from Rs. 65 lakhs if untouched.

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