Finance & EconomicsProductivity

Will you splurge or surge a windfall of 1 crore?

What will you do if I give you 1 crore rupees in Money

What will you do if I give you 1 crore?

You really don’t need to have millions of rupees to actually start dreaming about what you would do if you had that much money. After all, if you don’t even dream about it first how can you convert your dreams into reality?

Dreams > Thoughts > Actions > Reality

1 crore or 10 million rupees is actually not a very big amount. It may not let you retire for your whole life if you don’t make proper allocations of your windfall. Nevertheless, for most people, money could really help in making life-changing decisions in a career or business.

A lot of people would make some impulsive expenses if they suddenly received one crore rupees. But on the other hand, if they earned that money over time they would definitely be much wiser in their spending.

No matter how you managed to make one crore, you will be needing some sound financial planning in investing and spending it optimally. There are a lot of people who can spend all the amount within no time.

As a 30-year-old still building his career, I don’t have a crore with me yet. But I really look forward to making that much soon. I have worked in the financial sector in Italy where I have helped my clients manage millions of dollars. Alternatively, I have dealt with numerous business owners in North Italy who surely have much more than 1 crore rupees in wealth.

Based on my unique experience and limited worldview, here is:

What I would do if I have 1 crore rupees in wealth:

Step 0: Hire a certified accountant or financial planner

Most people will advise you to hire an accountant or a financial planner to make sure there are no discrepancies in your tax payments. Better safe than sorry during tax time.

Step 1: Invest the money, only spend part of the income and reinvest all the rest

If you win a windfall today, you really don’t want your spending to decrease your pie. The very first thing you should do is to make that money work for you as an income-generating asset.

Common Investment opportunities for Indians:

Investment 1: Money left in a bank account

In a country like India, the money left in a bank account would give you a risk-free 3.5-4% a year or in this case about 4 lakhs a year in risk-free income if you leave it all in a bank account.

Investment 2: Fixed Deposits

Alternatively, if you invest in fixed deposits, you could even make over 8% or 8 lakhs a year in risk free income.  

Investment 3: Stocks or Equities

If you are young, you could invest in the stock market to receive about 1.5% in dividends in the first year along with an average long-term yearly capital gain of over 16%. So you would receive about 1.5 lacs in the first year along with capital gains if you went long in a bull run. Even if you make losses in a diversified portfolio of blue chips in the first year, as long as the economy keeps growing the markets too should revert back to a positive upward trend.

Moreover, you may even see the markets bounce up at incredible double-digit rates in the next years. Dividends may also increase every year by around 20% if you are invested in a growing stable business, thus you could be earning over 10% yield to cost in dividends along with massive capital gains if you remain invested for more than 10 years. Your earnings really compound a lot every year after that.

Basically, if you have one crore today and invest it in a diversified stock portfolio filled with blue chip stocks across sectors you could end up having over 3 crores in 10 years along with an increasing yearly income of at least 4.5 lakhs by then.

Investment 4: Digital Currencies

There is an interesting correlation between the google search of bitcoin and its price. When the name of the currency is searched online more, the currency also seems to raise up in value. Apart from being a case study for behavioral finance, bitcoins could have made someone like me really rich as I had known about it for ages.

Even at the starting of January 2017, I knew I was late to ride the bitcoin train but decided to buy a small amount anyways. In about 5 months, I sold my stake for about 70% profits. A few months later the price would go on to rise up to almost 400%.

Bitcoins are very useful in making anonymous transactions and hence the demand for the currency should keep growing organically, As more illicit money transfers shift digital, Bitcoin will face more regulation and that can prove to be a headwind or boon to its growth. 

Is Algorand better than Bitcoin?

Algorand is very promising. With a better technology and a much smaller market capitalization, you can make a lot of money on it. Algorand has partnered with FIFA. Unlike Bitcoin based on Proof-of-work, Algorand uses a superior Proof-of-Stake which makes it energy efficient. In terms of transactions, users and other metrics, Algorand has very promising statistics. You can transfer Algorand to any wallet around the world in about 4 seconds and then view the transaction details on the blockchain. I myself became extremely bullish and decided to build on the Algorand blockchain.

Investment 5: Real Estate

Real Estate is the favorite Indian investment. Though apartments are nice, the more preferred option is an independent house or just plain land.

One approach practiced includes buying a piece of land and then selling it to an apartment builder who gives you a few apartments in return of the land. Real estate dealings in India occasionally include a part black transaction which can make your dealings expensive. But the recent currency demonetization and the expected low-interest rate regime should promote cheaper construction activity.

Keeping a few things in mind like connectivity, new public transport construction activity, water availability in the area, susceptibility to flooding, etc, should help you make a wiser choice. With the rise in Online shopping, more people can afford to live farther away from commercial centers.

But if you ask me I would really love to get some real estate near Lake Como like George Clooney. Living in Milan for over 7 years, it has been a while since I bought a 5 € train ticket to Como. The beautiful one-hour’s drive away really inspires the idea of retiring early in the suburbs.

Dream: Own Italian real estate near a beautiful lake!

I worked a year as a Territory Sales Executive for Western Union. I was given a car with a corporate credit card and was asked to open new business across North Italy. Best job ever that allowed me to see Italy in a way any tourist would dream to. Apart from relishing delicious lunch during my occasional client visits in different cities and towns of Italy, I really got to see a lot of beautiful Italian real estate and landscape. The job definitely convinced me to want to buy some beautiful Italian real estate someday.

The thing about Real Estate is that you can also find arbitrage opportunities in the market. You can buy land at a price and sell it at a higher price within no time if you find the right people. You could easily make a decent huge piece of return. Of Course, there is a little hard work in finding two people willing to sell and buy at those desired prices. And these days with technology and more efficient markets such arbitrage opportunities may be tougher to find. But earlier, there was a time when buyers could hardly conduct enough due diligence to fix a price. 

Real Estate Income Stream: Airbnb

Even owning apartments at tourist locations can be a great idea. During a trip to Faro, Portugal I had a wonderful stay at an Airbnb Apartment by the sea without even meeting the owner. We basically were given a code that would allow us to open the mailbox which had the keys inside. The instructions were to return the keys inside the mailbox after stay. The owner probably does not even stay around and just organizes guest stays and cleaning schedules. In simple words, I am trying to convey that owning an apartment has become increasingly profitable and passive. You can always easily rent it out on Airbnb for short-term guests. 

Real Estate Income Stream: REIT

Alternatively, there are always REITs, an investment vehicle that enables you to invest in real estate. It is almost like a mutual fund but is focused on various types of real estate. Being an extremely liquid way of investing in real estate, REITs also have a high dividend payout ratio and hence are a favorite for income-seeking investors.

Step 2: Run your own Business to make higher than Investment returns

I had started investing in the stock markets at an appropriate time towards the end of a bear run. Hence, I, fortunately, made decent gains in my stock investments over a period of time. A lot of other people stay away from the stock markets completely with distrust. Quite a few prefer to save enough to invest in their own business ventures. Honestly, if you want to make more money you will have to take more risks too.

In today’s age, starting an own business or even just buying an established business has become quite easy. In the simplest case, you could buy an established blog and enhance it further.

Starting a business was a popular opinion shared on a Facebook group for a similar question. Although, it was for a higher amount of 300,000 € or about 2.5 crores in Indian rupees. A lot of people living in Milan suggested buying an apartment to let out or opening a bar. This was an expected answer for a city with universities and popular global events like fashion and design shows. One unique suggestion was investing in car parking garages in the city. This was an interesting suggestion for an European city with expensive parking.

One crore rupees will hardly allow you to open a bar or own big real estate in today’s age though. However, it could allow you to invest your time in yourself or your start up idea. But before that do ensure that you have an emergency fund

A quiet room, a desk, computer and fast Internet can help you convert your idea into a business empire. One crore will give you all of that and much more.  Freedom to work on your goals with minimal distractions is a widespread entry barrier.

Conclusion: Money makes more money!

Talking to a financial expert is highly recommened as whatever research and financial planning you do may have some flaws. I have seen highly paid family memebers make the worst decisions inspite of my cautionary advices. I dont blame them as when you make big money you tend to not take advice from someone making lesser money than you. But I have myself made huge returns from stocks, fixed deposits and crypto while I have advised important institutional international clients managing millions on how best to hedge their risks for the worst case scenarios. I have built real estate valuation models for them and have also assisted a central bank with its stress testing risk management exercise.

When I advice on diversification of investments, I really mean it. Even if you want to invest money in your own business, diversify and invest some money into businesses that are managed by the best professionals around. Uncertainity is the only certain thing!

Hi, I’m Vineeth Naik

Liberal part time Blogger and full time Researcher with a broad range of experience, professionally and personally in Austria, Italy, UAE & India. Loves Finance, Business & Technology. Cares about society.

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