With a take-home salary of Rs 50,000 and monthly expenses of Rs 30,000, Mithilesh is ready to embark on his investment journey with a high-risk appetite and no dependents.
To achieve his ambitious target, he plans to start with a monthly SIP of Rs 10,000, with aspirations to increase this amount annually.
ET Mutual Funds spoke with Girirajan Murugan, CEO of FundsIndia, to explore effective strategies for wealth accumulation through mutual funds.
Girirajan emphasized the importance of disciplined investing and discussed how market fluctuations can impact investment outcomes.
Query From Mithilesh Pamnani
I am a 39-year-old single-working professional, earning a take-home salary of Rs 50,000 per month and living in a tier-2 city. My monthly expenses, including housing, food, and utilities, amount to Rs 30,000.
With a high-risk appetite and no dependents, I want to start investing in mutual funds with the goal of building a corpus of Rs 5 crore by the time I turn 60.
I’m already considering investing in a Nifty Index Fund and would like suggestions for three additional equity mutual funds to help me achieve my goal.
Responses from Girirajan Murugan, CEO, FundsIndia
Q) I plan to begin with a monthly SIP of INR 10,000 and increase my investment annually. Please let me know what monthly investment I should aim for to reach my target.
A) For a monthly SIP of Rs 10,000 assuming 12% returns, it will take close to 33 years to reach the corpus of Rs 5 cr. If you increase your SIP by 10% every year and assume 12% returns it takes close to 26 years to reach Rs 5 crore.
But, in rare circumstances, if there is a market crash (eg: Covid crash where markets fell by more than 30%) in the final 1-2 years, then at such times you should have the flexibility to extend your time frame by 1-2 years. You may need to reevaluate your goal corpus or consider increasing your SIP.
Q) How can a Rs 5 cr corpus be built in the next 20 years?
A) For a monthly SIP of Rs 25,000, with a 10% annual increase and assuming 12% returns it will take close to 20 years to reach the corpus of Rs 5 crore.
Every year, you increase your SIP contribution by 10%.
For example:
In the first year, you invest Rs 25,000 per month. In the second year, you increase the monthly investment by 10%, which makes it Rs 27,500 per month.
In the third year, the monthly contribution becomes Rs 30,250 (again 10% higher), and so on. This increasing SIP strategy allows you to gradually boost your contributions over time as your income and savings capacity grow.
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