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Business News/ Money / Personal Finance/  How much SIP is needed to create a corpus of 5 Cr in 20 years?
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How much SIP is needed to create a corpus of ₹5 Cr in 20 years?

A Systematic Investment Plan (SIP), commonly referred to as SIP, is a service provided by mutual funds to subscribers that allows them to make regular investments.

Mutual funds have the potential to produce returns that are higher than inflation in the long term. (istockphoto)Premium
Mutual funds have the potential to produce returns that are higher than inflation in the long term. (istockphoto)

A Systematic Investment Plan (SIP), commonly referred to as SIP, is a service provided by mutual funds to subscribers that allows them to make regular investments. The power of compounding, goal-based investment, top-up SIP, rupee cost averaging, and other advantages of SIP investment emerge with it. Because mutual funds invest in a variety of securities, including stocks, bonds, and other assets, investors are able to build diverse portfolios with minimal initial investment amounts. Mutual funds have the potential to produce returns that are higher than inflation in the long term, hence we have taken an example of how an investor can create a corpus of 5 Cr in 20 years based on an exclusive interview with different industry experts. 

Gautam Kalia, SVP and Head Super Investor at Sharekhan by BNP Paribas

It is always good to plan investment in the early stage of life as it helps to create a good corpus with a small amount of investment. To create a corpus of Rs.5 Crs in 20 years, investors should start the SIP of Rs.50,500pm assuming a return of 12% pa. If the investor is ready to step up SIP amount every year then he can create this corpus by starting the SIP amount by Rs.27,000 per annum and increasing this SIP amount every year by 10%.

Scheme NameCategory% of AllocationSIP Amount
ICICI Prudential Bluechip Fund - GrowthLarge Cap30%15,000
Kotak Equity Opportunities Fund - Reg - GrowthLarge & Mid15%7,500
Mirae Asset Midcap Fund - Reg - GrowthMid25%6,000
SBI Small Cap Fund - GrowthSmall25%7,000
HDFC Flexi Cap Fund - GrowthFlexi Cap30%15,000
   50,500

Rajesh Saitya, Co-founder & COO, GT Force

If your goal is to create a corpus of 5 Cr in 20 years, investing in mutual funds through a systematic investment plan (SIP) can be a smart and effective way to achieve your financial goals. To achieve a corpus of 5 Cr in 20 years, you would need to invest approximately 1,50,000 per month through a SIP. However, this can be achieved with careful planning and investing in the right mutual funds.

We recommend looking for mutual funds that have a strong track record of delivering consistent returns over the long-term, while also being well-diversified and low-cost. Some mutual funds that we suggest for long-term investors include:

· HDFC Top 100 Fund - This large-cap fund has a strong track record of delivering consistent returns over the long-term.

· ICICI Prudential Equity & Debt Fund - This fund has a diversified portfolio of equity and debt securities, making it a good option for long-term investors.

· Mirae Asset Large Cap Fund - This fund has consistently outperformed its benchmark index and has a well-diversified portfolio.

Investing in mutual funds through a SIP can help you achieve your financial goals while also promoting responsible and sustainable investment practices. At our company, we are committed to helping individuals achieve their financial goals through smart and ethical investment strategies.

Abhinav Angirish, Founder, Investonline.in

The most popular long-term investment vehicle is mutual funds since they offer not only liquidity but also dividends, diversification, experienced management, flexibility to invest in small amounts, cheaper cost, lower tax on gains, tax advantages, and more. Because it enables investors to maximise their returns from the force of compounding, rupee cost averaging, convenient investment mode, adjustable tenor, and other factors, a Systematic Investment Plan (SIP) is the most popular way to invest in mutual funds.

A huge corpus target typically entails a lengthy process. The hardest part of creating such a substantial corpus is persevering through all that life throws at us. There's a good possibility you'll succeed if we can keep up the discipline of investing frequently and keeping involved over the years. You will require SIPs of Rs. 51,000 per month (assuming returns of 12% pa) in equity mutual funds to accumulate a corpus of Rs.5 Crs in 20 years.

It's not simple to accumulate a 5 crore corpus over 20 years, but it is still feasible if you make smart financial decisions. Also, wise investment does not necessitate placing your funds in the riskiest MF schemes. The first step for investors is to assess their risk tolerance and level of comfort with the ups and downs of the market. A SIP into just equities mutual funds, for instance, has generally returned about 12%, but there have been years when the portfolio has lost money. Instead, you may get 10% returns from a diverse portfolio of asset classes that is more stable and reliable.

The investor can determine the appropriate quantity of SIPs to invest in equities or a diversified portfolio based on their comfort level with risk. To amass Rs. 5 crore in twenty years, you'll require a systematic investment plan (SIP) of Rs. 51,000 every month. On the other hand, a SIP of 65 thousand across various asset classes grows by about 10% to 5 crore over time. Investors can get on the path to long-term financial success by adopting a methodical and consistent strategy of investing in reputable mutual fund schemes.

In addition to the SIPs, investors should set aside money in a separate emergency fund so that they can access cash in times of crisis without having to dip into their SIPs' corpus.

Lastly, if at all possible, solicit the help of a reliable advisor. Keep in mind that while investing is simple, wealth creation is not! The goal is to amass a substantial chunk of money, and we're talking about Rs. 5 Crores. A capable advisor can assist you in investing into the best funds for your objective while helping you control your greed and fear and avoid falling prey to passing fads or marketing gimmicks.

In order to achieve target amount of Rs. 5 Crore in 20 years, assuming a rate of return of 12% , you need to invest Rs. 50,043 as monthly SIP amount. In order to achieve the target your lump sum Investment should be Rs. 51,83,338.

In order to achieve your target, you can invest in a diversified equity funds such as:

Mirae Asset Large Cap Fund - The scheme pertains to the Large cap equity fund category. The scheme needs to keep a minimum 80% of total assets in stocks of large cap companies. The scheme was launched in Apr-2008. The scheme has generated a CAGR of 14.48% since inception.

Canara Robeco Flexi Cap Fund - The scheme pertains to Flexi cap equity fund category. The scheme needs to keep a minimum 65% of total assets in equity stocks of companies, in any market cap - large cap, mid cap, small cap stocks. The scheme was launched in Sep-2003. The scheme has generated a CAGR of 17.00% since inception.

Nippon India Small Cap Fund - The scheme pertains to the small cap equity fund category. The scheme needs to keep Minimum 65% of total assets in stocks of small cap companies. The scheme was launched in Sep-2010. The scheme has generated a CAGR of 19.26%% since its inception.

Mayank Bhatnagar, Chief Operating Officer, FinEdge

To accumulate Rs. 5 Crore in 20 years, you’ll need to invest somewhere between Rs. 38,000 and Rs. 45,000 per month systematically in mutual funds (assuming a CAGR of 13%-14% per month depending upon the risk/reward of the funds chosen). Bear in mind that returns from equity mutual funds are non-linear, and volatility is to be expected!

Investing with clear goals in mind instead of in an ad-hoc manner can go a long way in helping you sidestep behavioural biases like greed and fear that can derail your journey. In the end, the difference between achieving your 5-crore target and falling short will depend upon your ability to stay disciplined throughout the long journey and not letting your emotions get the better of you.

As 20 years is a very long time horizon, you can and in fact should take measured risks by investing into small and mid-cap oriented funds that offer the best opportunity for wealth creation through compounding and rupee cost averaging. In this case, investing purely basis your own attitude to risk would be a mistake because you would be losing out on the opportunity to take advantage of such a long timeframe. If the volatility of small and mid-caps seems daunting, you could opt for a flexi cap fund too; but anything lower than that in risk would mean you’re not doing justice to the 20 year time horizon.

If a SIP of Rs. 38,000 seems like a lot, you could alternatively opt for a disciplined step-up strategy. By starting off with a SIP of Rs. 12,000 and stepping it up by just Rs. 5,000 per year, you could accumulate Rs. 5 Crore assuming a 14% CAGR from a high-risk fund. This is how the magic of disciplined, automated step ups work! In the end, understanding risk/reward and tailor making your investment strategy to what you’re comfortable with sustaining for the long term is critical.

Lallit Tripathi, chairman and managing director of Vedant Asset

This (the deal) will be a big positive for the tech start-up community. The move would also be positive for the Indian start-up ecosystem.

In order to create a corpus of 5 crore in the next 20 years, we need an investment of Rs. 50,000 per month with an annual return of 12%. Thus, a total investment of Rs. 1,20,00,000 will finally give you a corpus of Rs. 5 Crore after 20 years. Money multiplication is an alluring term but the real sense of it lies in the understanding of how SIP works. Investment in Mutual Funds is all about patience, persistence and perseverance.

Based on the potential of Indian economy and markets we believe that investors should look funds which are consistent in performance, inspite market volatility. Based on past performance of funds investors can rely on some of the funds which have performed well in the previous years. It must be noted that these funds have been recommended on the basis of their past performance and future growth capabilities. But there might be unforeseen circumstances because of which we may need to switch investment to some other reliable funds of those times. Mutual funds are subject to market risks.But those who stay for long, benefit huge.

These funds are –

• HDFC Top 100 Fund - Reg(G)

• ICICI Pru Large & Mid Cap Fund - Reg(G)

• HDFC Large and Mid Cap Fund - Reg (G)

• Canara Robeco Emerging Equities - Reg(G)

• HDFC Multicap Fund - Reg(G)

• Nippon India Multicap Fund - Reg(G)

• HDFC Midcap Opportunities Fund - Reg(G)

• ICICI Pru MidCap Fund - Reg(G)

• HDFC Small Cap Fund - Reg(G)

• Canara Robeco Small Cap Fund - Reg (G)

Nirav Karkera, Head of Research, Fisdom

A portfolio created with a time horizon of as much as 20 years is quite likely to be an equity-based portfolio. In such a case, if we were to consider the expected performance of broader equities in the medium term, the same could be pegged in the ballpark of a 12% CAGR. Considering intermittent moderation in performance and probability of elevated performance owing to active selection, the range could be broadened to 10% CAGR and 14% CAGR. 

Mathematically, considering a target portfolio of INR 5 Crores in 20 years, this would entail a monthly SIP contribution of anywhere in the range of INR 45,000 to INR 75,000. Irrespective of confidence around one’s investment decisions, an endeavour to invest an amount closer to the upper threshold would augur well for the investor. A higher-than-computed investment offer capitalises on rough performance patches while enhancing corpus value in a favourable environment.

 

 

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ABOUT THE AUTHOR
Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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Published: 20 Mar 2023, 08:06 PM IST
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