Mutual funds: Monthly SIP you need to accumulate ₹10 crore in 20 years
2 min read . Updated: 29 Oct 2022, 07:46 AM IST
Premium- SIP calculator: 15 X 15 X 15 rule of mutual funds suggest that one can expect 15% annual return if the time horizon is 15 years or more
Mutual fund investments are considered good investment tool for a long term investor who is ready to take limited risk. The risk factor in equity mutual funds goes further down if the investor has chosen to invest through systematic investment plan or SIP route. In mutual fund SIP investment, an investor gets an average return on the growth given by the markets during the tenure of investment. That's why, investment experts advise that long term SIP can be started any time and one should continue to invest in SIP without bothering about the market movement. Though, it is advised to start investing as early as possible but in case, someone couldn't start saving for one's long term goal in early phase of one's career, mutual funds SIP can help them achieve their long term goal with some adaptation.
Speaking on the adaptation one should do to achieve long term investment goal with smallest possible time, Kartik Jhaveri, Manager — Wealth at Transcend Capital said, "A common mistake that a long term mutual fund SIP investor commits is continuing with the same monthly SIP amount for long term. However, the smart practice is to increase one's monthly SIP with the increase in one's income. In other words, one has to step up one's monthly SIP on an annual basis. It helps an investor to achieve one's long term goal with smallest possible SIP amount. Annual step up in SIP amount also helps an investor to achieve one's long term investment goal in least possible time. So, a late investor can start a monthly SIP using annual step up to achieve one's long term goal."
15 X 15 X 15 rule of mutual funds
On how to create ₹10 crore wealth in 20 years, SEBI registered tax and investment expert Jitendra Solanki said, "15 X 15 X 15 rule of mutual funds suggest that one can expect 15 per cent annual return if the time horizon is 15 years or more. So, a mutual fund SIP investor investing for 20 years can expect 15 per cent return on one's money if the mutual fund plan has been chosen with proper home work. However, for generating ₹10 crore in 20 years expecting 15 per cent annual return one would require start a monthly SIP of around ₹75,000, which won't be an easy task for a middle middle class or even the higher middle class individual. So, one will have to use annual step up to bring this whopping ₹75,000 down to one's reach.
On how much annual step would be enough to meet one's ₹10 crore goal, Kartik Jhaveri of Transcend Capital said, "Normal practice is 10 per cent annual step up in one's SIP but in case the investor has failed to start investing in early phase of one's career, then 15 per cent annual step up will be enough to meet one's long term investment goal in least possible time horizon."
Mutual fund calculator
Assuming 15 per cent annual return and 15 per cent annual step up in one's monthly SIP amount, the mutual fund SIP calculator suggests that ₹26,500 to ₹27,000 monthly SIP would be required to accumulate ₹10 crore in 20 years.
Disclaimer: The views and recommendations made above are those of individual experts or wealth management companies, and not of Mint.
