One of the key goals of wealth creation is to meet your financial goals. The process gets simpler when your financial goal is specific, time-bound and defined by a number.
Suppose you want to accumulate ₹1 crore over a period of 10 years, and intend to achieve it by investing your funds in mutual funds. One of the easiest ways to do this is to invest your money in mutual fund SIPs (systematic investment plans).
This not only allows investors to stick to an investment discipline but also enables them to make the most of rupee-cost averaging.
"Building a corpus of ₹1 crore in 10 years through SIPs is certainly achievable, but it requires a meaningful monthly investment. While a 10-year horizon is considered long-term, investors should avoid allocating 100% to equity. Even a prolonged phase of market underperformance or sideways movement can impact the accumulated corpus," says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services.
Accumulating ₹1 crore
To accumulate ₹1 crore by investing in mutual fund SIPs, investors must be mindful of two variables: the rate of return and the amount invested. The higher these two variables, the greater the return on investment.
For example, if your investment delivers a return of 13% per annum, you would need ₹40,600 to accumulate ₹1 crore (check the table below).
But if your investment delivers a slightly lower return (say 12% p.a.), you would need a higher SIP ( ₹43,050) to accumulate ₹1 crore over a 10-year period.
However, if your investment delivers even lower returns (11% a year), you would need an SIP of ₹45,700 in mutual funds to accumulate ₹1 crore in a decade.
Finally, mutual funds which deliver 10% a year would need an investment of ₹48,500 to accumulate ₹1 crore in 10 years.
It is worth noting that the rate of return delivered by your investment cannot be predicted precisely. Even if you examine the past returns of a mutual fund, the rate of return may not remain the same. It is therefore vital to maintain a margin of safety while you work towards achieving your financial goals.
Disclaimer: This story is for educational purposes only. 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 making any investment decisions.
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