Rs 8,00,000 One-time Investment in Mutual Funds: Mutual funds are a prominent investment option for investors who want to invest in equity, commodity, and diversified assets. Funds invest in stocks, international funds, sovereign and corporate bonds, gold, silver, commodities, etc. In equity, they invest in a number of stocks, leading to the diversification of the investment.
Lump sum and systematic investment plan (SIP) are two prominent ways to invest in mutual funds.
While in a lump sum investment, the mutual fund investor invests one time; in SIP, the investment is periodic.
If one has a long-term investment horizon, an investor may also create a retirement corpus from a one-time investment in a mutual fund.
If they invest in the early stage of their career, by 50 years of age, they may create a sizeable corpus and take an early retirement.
In this write-up, we will tell you how an Rs 8,00,000 lump sum (one-time) investment in an equity mutual fund scheme can generate a corpus worth Rs 5,00,00,000 in the long run.
Lump sum investment in a mutual fund
One can make a lump sum investment in equity, hybrid, or debt mutual funds.
In a lump sum investment, the investor invests an amount in a mutual fund one time and lets it grow over time.
One may register significant growth in the short term, but the lump sum investment is best suited for investors with a long-term investment horizon.
Retirement corpus building
Mutual fund investment diversifies one’s investments, mitigating risk compared to direct equity exposure, and thus, can give steady returns in the long run.
So, a lot of people use mutual fund investment to create a retirement corpus.
Most prefer the SIP method as it suits their earning cycle, but some also follow the lump sum method to create a corpus.
Examples of retirement corpus building from mutual fund investment
Suppose a 25-year-old has Rs 5 lakh and wants to make a lump sum investment to build a corpus by 55 years of age.
If they get a 12 per cent annualised return, let’s see the corpus they can generate from their lump sum investment.
At a 12 per cent annualised return, estimated capital gains will be Rs 1,44,79,961, and the estimated corpus will be Rs 1,49,79,961.
You can see that the investment grew by 50 times.
This is the advantage of starting to invest early.
The years of compound growth help the corpus grow faster with time.
From Rs 8 lakh investment to Rs 5 crore corpus
We will calculate the retirement corpus building at a 12 per cent, 13 per cent, and 14 per cent annualised return on investments and see in how many years the goal can be reached.
From Rs 8 lakh investment to Rs 5 cr corpus (At 12% return)
At a 12 per cent annualised return, the target can be achieved in an estimated 37 years.
In 37 years, estimated capital gains will be Rs 5,21,85,474, and the estimated corpus will be Rs 5,29,85,474.
From Rs 8 lakh investment to Rs 5 cr corpus (At 13% return)
At a 13 per cent annualised return, the target can be achieved in an estimated 34 years.
In 34 years, estimated capital gains will be Rs 5,02,21,951, and the estimated corpus will be Rs 5,10,21,951.
From Rs 8 lakh investment to Rs 5 cr corpus (At 14% return)
At a 13 per cent annualised return, the target can be achieved in an estimated 32 years.
In 32 years, estimated capital gains will be Rs 5,21,71,861, and the estimated corpus will be Rs 5,29,71,861.