Rs 25,000 monthly SIP at 27: Investing in mutual funds through a systematic investment plan (SIP) has become a common practice lately. It is likely that whoever is reading this article currently may have a mutual fund portfolio but lacks guidance on which mutual fund scheme they should invest in to move towards their target, say, a Rs 1 crore corpus. In this article, we have particularly focused on a 27-year-old investor with a target corpus of Rs 5 crore and an investment period of 27 years.
With inputs from Aditya Shah, Chartered Financial Analyst (CFA), who shared his insights and mutual fund recommendations to help investors target a Rs 5 crore corpus on ET Now’s show ‘Bano Apna Finance Minister’. Without taking much of your time, let’s go through the mutual fund recommendations and other significant details.
Rs 25,000 monthly SIP at 27: Can you build a Rs 5 cr corpus in 27 years?
- Investor age: 27 years
- Investment period: 27 years
- Target corpus: Rs 5 crore
- Assumed annualised return: 12 per cent
- SIP investment: Rs 25,000 (Monthly investment)
Expert suggestion
The longer the time horizon, the more an investor’s investment benefits from compounding. If we assume a 12 per cent return, an SIP of Rs 25,000 would grow to around Rs 2.28 crore in 20 years, Rs 3.76 crore in 25 years, and around Rs 5.35 crore in 27 years.
So, with the SIP mentioned (Rs 25,000), the investor can achieve this target in 27 years, assuming a nominal return of 12 per cent. If the investor’s time horizon is longer, then increasing the SIP by 10 per cent every year, or by whatever amount the investor can afford, would be even better. The expert here suggested a step-up SIP of 10 per cent each year.
Since the time horizon is quite long, the expert has given more importance to small cap and mid cap funds within the Rs 25,000 SIP. The longer the time horizon, the more beneficial it can be to stay invested in small cap and mid cap funds, said the expert.
Mutual fund recommendations by expert
Expert Aditya Shah has recommended the following funds with the investment amount:
- Bandhan Small Cap Fund: Rs 10,000 monthly investment
- Kotak Mid Cap Fund: Rs 10,000 monthly investment
- HDFC Flexi Cap Fund: Rs 5,000 monthly investment
However, keep in mind that returns from equity markets and equity mutual funds are not guaranteed.
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(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests that its readers/audience consult their financial advisors before making any money-related decisions.)
