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Business News/ Money / Personal Finance/  How much SIP should you make to get 1 Cr in 10 years via mutual funds?
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How much SIP should you make to get ₹1 Cr in 10 years via mutual funds?

Mutual funds have a track record of being long-term investments where investors pool their funds and invest through fund managers in stocks, bonds, and other securities.

Mutual funds are generally regarded as a secure investment since they have minimal fees, adequate liquidity, the flexibility to diversify among numerous securities and other things like debt, gold, etc., and start with any amount as low as ₹500 per month. (istockphoto)Premium
Mutual funds are generally regarded as a secure investment since they have minimal fees, adequate liquidity, the flexibility to diversify among numerous securities and other things like debt, gold, etc., and start with any amount as low as 500 per month. (istockphoto)

Mutual funds have a track record of being long-term investments where investors pool their funds and invest through fund managers in stocks, bonds, and other securities. Mutual funds are generally regarded as a secure investment since they have minimal fees, adequate liquidity, the flexibility to diversify among numerous securities and other things like debt, gold, etc., and start with any amount as low as 500 per month. Let's use an investor who wishes to invest in mutual funds as an example. If he wants to accumulate 1 crore in 10 years, what mutual funds are suitable for him, and how much should he deposit each month via SIP to achieve the goal? Let’s find experts' views.

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

To create a corpus of Rs.1 Crs in 10 years, investors should start a SIP of Rs.43,500 per month or should start a SIP of Rs.32,000 per month and increase this by 10% every year.

The Investor can achieve this target with a lumpsum investment of Rs.32,20,000/-.

The above required SIP and lumpsum investment is after assuming a return of 12%pa and the investor is ready to take the risk.

The investor should allocate this investment in the below schemes.

1. ICICI Prudential Bluechip Fund - Growth- Large cap category, % of allocation 30%.

2. SBI Large & Midcap Fund - Growth- Large & mid category, 15% of allocation.

3. Mirae Asset Midcap Fund - Reg - Growth (Mid Cap), Kotak Small Cap Fund - Reg - Growth (Small Cap)- 25% of allocation

4. HDFC Flexi Cap Fund - Growth- 30% of allocation. 

Mayank Bhatnagar, Chief Operating Officer, FinEdge

When it comes to investing into mutual funds, we strongly believe that “why" and “how" you invest matters just as much as “where". You may end up picking the best performing mutual fund, but if you don’t address the behaviour gap in your investments, you’ll likely end up making poor returns or even losing money! Which is why a clearly defined financial goal is the best way to start. It’s important to ask yourself why you need this Rs. 1 Crore and what you intend to accomplish with it – would you like to make a down payment for a home, pay for your child’s graduation, or simply bolster your retirement fund? “Investing with purpose" will greatly increase your chances of success.

Now, the math - to accumulate Rs. 1 Crore in 10 years, you’ll probably need to invest somewhere between Rs. 40,000 and Rs. 45,000 per month systematically in mutual funds (assuming a CAGR of 11%-13% per month depending upon the risk/reward of the funds chosen). Keep in mind that these returns are not assured, and are non-linear, meaning that you may be in the red for 3 years only to recoup your losses and then some in a matter of weeks!

Where should you invest? 

As 10 years is an adequately long timeframe, you could consider investing into small or mid cap-oriented funds that offer the best opportunity for compounding & rupee cost averaging to work their magic. Having said that, it’s critical to acquire a thorough understanding of what to expect while investing into high risk/high return funds, so that a lean market patch doesn’t derail your investing journey. The support of a qualified advisor can sometimes make all the difference.

Alternatively, you could also follow a disciplined step-up strategy. By starting off with a SIP of Rs. 20,000 and stepping it up by just Rs. 6,000 per year, you could accumulate Rs. 1 Crore assuming a 13% CAGR from a high-risk fund! That’s the magic of disciplined step ups for you.

A lot of investors end up selecting funds based on 1-3-year returns. This is a mistake, because they often end up being flashes in the pan and hurting investors. For your 1 Cr quest, we would advise you to stick with long-term outperformers in the small and mid-cap space, even if their recent returns have not been at the top of the pack. If the prospect of stomaching 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 your impressive investing timeframe.

Mr. Shams Tabrej, founder of Ezeepay

If the SIP amount was increased by 5% annually and the interest rate by 12%, it would be possible to receive 1 crore in ten years. If the SIP was maintained, this would be the case. With a monthly investment of 40,000 in a mutual fund plan, the sum would reach 1 crore after 10 years and 6 months. According to the findings of Value Research, large-cap funds achieved an average return on investment of 13.36% during ten years. 

An investment in a mutual fund commonly referred to as a systematic investment plan (SIP), is equivalent to an investment in a systematic investment plan (SIP), which invests in various assets following a predetermined asset allocation approach. It is also possible to amass one crore in ten years by saving and investing approximately fifty thousand rupees every month in an aggressive portfolio. This method will take ten years to implement. A monthly investment of Rs. 30,000 will yield a return of almost Rs. 66 lakhs (calculations based on a long-term return of 12%).

Recommended SIPs

ICICI Prudential Bluechip Equity Fund.

HDFC Small Cap Fund.

Mr. Ashish Misra, Chief Operating Officer – Retail Banking at Fincare SFB

The amount you need to invest in mutual funds to reach 1 crore in 10 years depends on the expected rate of return of the mutual fund and the investment strategy you choose.

Assuming an average annual return of 12%, you need to invest around 36 Lakhs to reach a corpus of 1 Crore in 10 years. However, please note that mutual fund returns are subject to market risks and past performance is not a guarantee of future returns.

As for fund recommendations, it is important to select funds that align with your investment goals, risk appetite, and investment horizon. One must consult a certified financial advisor or use an online investment platform to explore and select mutual funds that meet their investment objectives. It is also important to regularly monitor and rebalance your investment portfolio to ensure that it remains aligned with your goals and risk tolerance.

Anand Rathi, Co-founder of MIRA Money

One must split the investment holding period into two parts when planning for ten years. 1st half will be for seven years, where the investor can take some risks, and the second half of three years is where the investor takes lesser risks. One can start with a SIP amount of as low as Rs.25,000 and then aggressively top up the SIP at the rate of 20% for the first five years. Then the top-up increase rate can be 10% as there will be more commitments as we grow older. 

The choice of funds doesn’t necessarily need to be complex. It can be a mixture of Marketcap index funds like Nifty 50, Midcap 150, and Smallcap 250, along with some sector calls for additional returns. This can generate good aggressive returns if managed well in the initial seven years, and then one can slowly move to debt options to preserve the returns and capital saved for three years. The IRR that we should expect to grow by is 12%, and this plan should do the job.

Fund recommendation:

· Motilal Oswal Nifty Index Fund

· Nippon India Midcap 150 Fund

· Nippon India Smallcap 250 Fund

Mr. Harish Menon, Co-founder and head of Investments and product research at House of Alpha

As Indian economy continues to develop and inflation presumably gets lower over the next 10 years, conservative estimate of annual returns from equity markets would be around 10% post tax. At this rate, if one has to accumulate 1 crore INR in 10 years, the monthly investment needed would be around INR 50,000/-. One time lumpsum investment needed would be around 40 lakhs INR to be invested for 10 years.

A simple long-term portfolio could be a mix of index funds. 50% in NIFTY Index Fund, 30% in Midcap Index Fund and 20% in Junior Cap Index Fund would suffice for 10 years horizon.

If an investor prefers to invest in an actively managed fund, then a flexi cap fund would be an appropriate choice for investment.

Ulhas Joshi, CEO, Rank MF, the Samco Group's research and distribution mutual fund platform

To create a corpus of Rs.1 Crore after 10 years, one needs to start SIP’s of around Rs.44,000 per month. Stepping up your SIP’s by 10% every year will help you achieve your goals faster. One can consider investing in:

· -Samco Flexicap Fund

· -HDFC Balanced Advantage Fund

· -DSP Quant Fund

· -Edelweiss NIFTY 100 Quality Index".

Nidhi Manchanda, Certified Financial Planner, Head of Training, Research & Development at Fintoo

Mutual fund investments can be an effective means of creating wealth and fulfilling your financial objectives. However, choosing the appropriate mutual fund category and determining the initial investment amount can be challenging. To guide investors in their investment journey towards accumulating a corpus of 1 Crore within a 10-year period, here are some suggestions based on different risk appetites.

Investors who have an aggressive risk appetite and aim to accumulate a corpus of 1 Crore in 10 years are advised to consider investing in a combination of Midcap and Smallcap mutual funds. These funds invest in companies that have the potential for higher returns in the long term. Assuming an annualized CAGR of 15%, an investor would need to begin a SIP of approximately 35,886 per month for 10 years to achieve their goal. It is important to note that over the past decade, the Midcap and Smallcap mutual fund categories have generated CAGRs of 18.58% and 20.24% respectively. Some of the top-performing funds in these categories include SBI Small Cap Fund, Nippon India Small Cap Fund, and Kotak Emerging Equity Fund.

If an investor has a moderate risk profile, it is recommended that they invest in the Flexicap or Multicap category of mutual funds, which invest in a diversified portfolio of stocks across all market segments. Assuming an individual plans to accumulate a corpus of 1 Crore over a period of 10 years and the fund generates an annualized CAGR of 12%, then they need to start a monthly SIP of around 43,040 to achieve the required corpus. In the last 10 years, Flexi cap mutual fund category has delivered a CAGR of 14.57%. Some of the top-performing funds in this category are Quant Flexicap Fund, Kotak Flexi Cap Fund, and Invesco India Multicap Fund.

Investors who have a conservative risk profile are recommended to invest in mutual funds in the Large Cap category. For those planning to accumulate a corpus of 1 Crore over a 10-year period, investing in Large Cap mutual funds can be a good option. Assuming a fund generates an annualized CAGR of 10%, an individual needs to start a SIP of approximately 48,413 per month for 10 years to achieve the desired corpus. The Large Cap mutual fund category has delivered a CAGR of 13.14% in the last decade, with top-performing funds such as Mirae Asset Large Cap Fund and Nippon India Large Cap Fund. 

It is strongly advised to conduct thorough research and compare various mutual funds within a category before making an investment decision, to ensure that you select a fund that consistently outperforms its peers and benchmark.

Yash Joshi , Co founder and Director, UpperCrust Wealth Pvt. Ltd

The amount you need to invest in 10 years to accumulate 1 crore depends on several factors such as the expected rate of return, the investment horizon, and the risk profile. Assuming a 12% rate of return, you need to invest approximately 45,000 per month for 10 years to accumulate 1 crore. Alternatively you can opt for step-up SIP route. 

Where you can start with 32,000 a month and increase the SIP value by 10% every year. However, it's important to note that this is just an estimate, and actual returns may vary depending on market conditions and other factors. It's always recommended to consult a financial advisor or use a financial calculator to determine the exact amount you need to invest to achieve your financial goals. As for mutual fund recommendations, here are a few funds that have delivered consistent returns over the long term:

· Axis Bluechip Fund - Large Cap Fund

· Mirae Asset Large Cap Fund - Large Cap Fund

· ICICI Prudential Bluechip Fund - Large Cap Fund

· SBI Magnum Multicap Fund - Multi Cap Fund

· Kotak Standard Multicap Fund - Multi Cap Fund

· Aditya Birla Sun Life Equity Fund - Multi Cap Fund

Please note that these are just a few recommendations, and you should always consult a financial advisor before investing in mutual funds. It's important to consider your risk profile, investment horizon, and financial goals before selecting a mutual fund. Additionally, past performance is not a guarantee of future returns, and mutual fund investments are subject to market risks.

Mr Sachin Gupta, Co-founder and Chief Product Officer, TransBnk

A mutual fund is one the modern-day instrument which is designed to reap decent results in the Mid to long term. We as an investor still need to choose the right asset allocation: Depending on your risk appetite and investment goals, choose a mix of equity, debt, and hybrid mutual funds.

For instance, if you have a long-term investment horizon and are willing to take higher risks, you can consider investing more in equity funds, whereas if you have a short-term investment horizon or are risk-averse, you can consider investing more in debt or hybrid funds. Basis your strategy you may look at investing 30k-60k per month to get a corpus of 1 Cr in a10 year term (CAGR will be basis of your investment strategy).

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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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: 28 Feb 2023, 08:33 PM IST
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