For a big corpus, either increase investment amount or tenor1 min read . Updated: 22 Mar 2013, 07:18 PM IST
A CAGR of 12% is a reasonable expectation over the long term.
I want maximum returns on my investments and I am ready to take risk. Currently, I invest 10,000 per month in systematic investment plan with a target of 30-35 lakh in 10 years. I don’t have any objective for section 80C and I just want higher returns. My SIP investments are: Birla Sun Life Dividend Yield Plus (2,000), Birla Sun Life 95 (2,000), HDFC Top 200 (2,000), and ICICI Prudential Bluechip Equity (2,000). Please suggest me if my investment plan is enough to achieve my goal. Please let me know if I need to close some of the above plans and divert the funds to some other mutual fund schemes.
—Abhinov Kumar Gupta
To generate a corpus of 30 lakh in a period of 10 years with a monthly investment of 10,000, you would need a compounded annual growth rate (CAGR) of 17% from your portfolio. That is a very high rate of return to expect on a sustained basis over 10 years even for the most aggressively designed portfolio. I would recommend that you either increase your SIP amount or the tenor of your investment. For example, a CAGR of 12% (a more reasonable expectation) would require you to invest about 15,000 a month to reach your goal. Alternately, you can achieve your target with the same amount of investment and a 12% CAGR if you extend your tenor by a couple of years.
However, these numbers are based on some long-term averages that may or may not hold true. Practically speaking, you should start investing with your current planned amount, increase it as and when you can, and do annual reviews of your portfolio growth. As years go by, you’ll have a better sense of where you are and you can tweak the amount, tenor, or the investment choices to take you to your goal.
Regarding your portfolio, you have provided four funds totalling 8,000 out of the monthly investment amount of 10,000. The funds in your portfolio are good funds—a couple of large-cap-oriented funds along with a balanced fund and a mid-cap fund. For the remaining 2,000, you can add another mid-cap fund to your portfolio (keeping with your aggressive stance) in the form of HDFC Midcap Opportunities.
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