I am 40 years old and have two children, aged 10 and 5. I want to build corpus of around Rs3 crore in next 10 years through regular and systematic investments.
My current mutual fund corpus is around Rs60 lakh and have running SIPs of Rs60,000 mainly in large, mid and small-caps.
1. Will I be able to make around Rs3 crore corpus at the end of 10 years
2. I want to choose one sectoral fund at this point of time for another SIP of Rs10,000 for 10 years.
Please suggest which sector should I focus on - pharma, IT or consumer fund.
Name withheld on request
Answer by Harshad Chetanwala, founder MyWealthGrowth.com
Your plan of creating a corpus of Rs3 crore in the next 10 years with the help of your accumulated amount of Rs60 lakh and regular SIPs of Rs70,000 can be achieved if your portfolio generates a 10% p.a. return. It is quite reasonable to assume a 10% return from your equity-oriented portfolio over the long term.
You can follow de-risking strategy for this goal where you start withdrawing a part of the accumulated amount every month for one year through SWP. This will help you to reduce the impact on your overall accumulated portfolio if the markets are not in your favour in the tenth year. In such a case you will have to increase your SIPs annually by 6% and invest for nine years. From the beginning of the tenth year, you can start withdrawing monthly and by the end of the tenth year, you should have Rs3 crore with you.
As you are investing in large cap, mid cap and small cap funds already, it may not be necessary for you to invest in a sectoral fund. Sectoral funds are cyclical and do carry additional risk. Investment in such funds happens only in a particular sector or theme. You can achieve your goal with the help of a well-diversified equity fund portfolio as well. While we do not have idea about your present allocation in mid cap and small cap funds, it is better to restrict it up to 20%. As an alternative, you may add flexicap fund to your portfolio as these funds invest a blend of large cap, mid cap and small cap depending on market outlook. However, if you would still like to persist with a sectoral fund, then you can consider IT over pharma or any other sectoral funds.
(Have queries on personal finance? Email us at mintmoney@livemint.com)
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!