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I have been investing in mutual funds (MFs) since the last four years through the systematic investment plan (SIP) route. These are the MF I am investing in,

1. Kotak Flexicap Fund - Direct Plan 10,000 per month

2. SBI Blue Chip Fund - Direct Plan 10,000 per month

3. Nippon India Vision Fund - Direct Plan 5,000 per month

4. Aditya Birla Sun Life Frontline Equity Fund - Direct Plan 5,000 per month

5. Invesco India Contra Fund - Direct Plan 5,000 per month

Extended internal rate of return or XIRR for these funds is at 15-20% over the years and the total value is around 20 lakh as of now.

I am 40 years old and do not have any loan. I have a house (worth 1.2 crore) and a couple of plots as an investment (worth 1.5 crore). My aim is to build a fund for my retirement and my kid's higher education (who is four years old now). This is what I think I would need:

1. Retirement 2.5 crore in next 15 years

2. Kids higher education 1.5 crore in next 12-15 years

I am ok to increase my monthly investment to achieve these targets. Can you please help with the investment strategy?

—Name withheld on request

If we consider the timeline for your retirement and child’s education goals of 15 years you need to do SIPs of 62,000 per month assuming 12% return per annum. This also includes the growth of your existing mutual fund portfolio of 20 lakh over these years. You can also achieve these goals by increasing your SIPs by 10% every year. The real estate investment has not been considered as the growth rate of such investment is subjective depending on different factors. If we assume a 5% annual return on your real estate investment then you will be able to achieve this goal with SIPs of 19,000 per month.

You may also like to rethink your plan of accumulating 2.5 crore for your retirement. Since you plan to retire at the age of 55 and if we assume a life expectancy up to 80 years, the accumulated amount is good for the family who has their present monthly expenses of 35,000 per month. If your monthly expenses excluding school fees are more than 35,000 at present then you may like to rework the retirement corpus amount. In case your present monthly expenses are 50,000 per month then you will need 3.38 crore and if it is 60,000 then you will need 4 crore instead of 2.5 crore.

—Answer by Harshad Chetanwala, founder

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