How you can get a ₹1 crore corpus in 10 years with an SIP

I am 40 years old and want to achieve financial freedom in 10 years. For this, I want to accumulate ₹1 crore corpus through a systematic investment plan (SIP) and can invest ₹30,000 a month. How do I achieve this target? I would like to go with index funds.

— Name withheld on request

To build a corpus of ₹1 crore in 10 years, you would need to save and invest close to ₹50,000 a month in an aggressive portfolio. Investing ₹30,000 a month would get you to around ₹66 lakh (all calculations assuming a long-term return of 12%).

One way in which you can make the arithmetic work is to slowly increase your SIP through the years. This approach, called Step-up SIP, can work wonders for your portfolio value and help you realize your goal. If you start with ₹30,000 a month and every year increase the monthly amount by ₹5,000, then you can indeed achieve your goal.

 Regarding the portfolio, you can use a combination of equity funds from the Mint20 list to achieve your goal. For example, you can have an equal weighted portfolio of 4 funds - UTI Nifty Index Fund, Canara Robeco Flexi Cap Fund, SBI Small Cap fund, and Edelweiss Balanced Advantage Fund to take care of your investments.

I am 19 years old and can invest ₹1,000- ₹2,000 every month. Can you please suggest the best funds for this? 

— Name withheld on request

It’s very good that you are starting your investing career at such a young age. 

If you are just investing ₹1,000 a month, you can go with an index fund. The advantage is that you do not incur fund management risk and your returns will be proportional if not identical to the broad market performance. This choice is better also because in recent past, large-cap funds have struggled to beat index funds that they hold as their benchmarks.

You can choose UTI Nifty Index fund (direct plan). If you would like to invest another  ₹1,000, you can go with Parag Parikh Flexi Cap Fund. This is an aggressive fund that invests in both domestic and international markets (although there is a present moratorium on the latter). This fund will enable you to study the fund manager’s investment style and how they try to beat the benchmarks. As your investment amount grows, you can add to these funds. However, keep the list to around 6 funds in total so that you can manage them efficiently.

Srikanth Meenakshi is co-founder, PrimeInvestor.