Where do I invest SIP of ₹25,000 for the next decade?

I am 39 years old and have been investing in mutual funds (MF) for 18 months. I am planning to do a monthly SIP (systematic investment plan) of ₹25,000 for 10 years. My monthly expenses work out to around ₹40,000 now. 

My current MF holdings are in Parag Parikh Flexi Cap Fund, Navi Nifty 50 Index Fund and Mirae Asset Tax Saver Fund. I have also made lump sum investments in Canara Robeco Emerging Equities Fund, Nippon India Multi-Asset Fund  and Axis Short Term Fund. 

What should my MF portfolio for the next decade be? Will it help with my retirement? How much corpus would I be able to build if I invest ₹25,000 per month along with my existing portfolio and increase the regular investment by 5% every year for 10 years? 

 —Name withheld on request

Let us start with how much corpus you would need for your retirement. Your present monthly expenses of ₹40,000 would work out to approximately ₹1.36 lakh considering inflation of 6% per annum (p.a.) at the time of your retirement i.e after 21 years. So, you will need a retirement corpus of ₹3.09 crore to ensure a monthly withdrawal of ₹1.36 lakh. You should also add some expenses like healthcare, travel and higher health insurance premium while evaluating retirement needs.

If you were to invest ₹25,000 per month, you will be able to accumulate approximately ₹1.91 crore assuming a 10% p.a. growth rate and ₹2.55 crore at 12% p.a. This is lesser than your goal amount. You can plan to invest for 13 years instead of 10 years, if the equity funds grow by 12% p.a. 

In the case of 10% p.a. growth, you will have to invest for 20 years. Hence, you must invest for a longer duration and raise the investment by 5% every year. 

 Nippon Multi Asset Fund is a hybrid fund that invests across different asset classes, including gold, based on market conditions. Hence, you may not invest in it through SIPs. It is better to invest in equity funds through SIPs for your retirement. The equity funds in your portfolio are good and you can continue with them. You can add SIP in Canara Robeco Emerging Equities, Kotak Emerging Equity Fund (mid cap fund) and SBI Focused Equity/IIFL Focused Equity.

 Harshad Chetanwala is co-founder at MyWealthGrowth.com.