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What are the best SIPs to invest in monthly to reach 1 crore in 3 years?

Ramalingam Kalirajan |7510 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by aneeqa on Aug 11, 2024

Please advice me on the best SIP to invest on monthly basis to earn 1 crore in 3 years

Ans: Investing with the goal of earning Rs. 1 crore in just 3 years through a Systematic Investment Plan (SIP) is ambitious and risky. The stock market, while capable of delivering high returns, requires a longer investment horizon to mitigate risks associated with market volatility.

Why 3 Years is Too Short for SIP Investments
Market Volatility: The stock market can be unpredictable in the short term. Investing for just 3 years exposes you to significant risks, including the possibility of capital loss.

Realistic Returns: To achieve Rs. 1 crore in 3 years, you would need an extraordinarily high rate of return, which is unrealistic through traditional equity mutual funds. Equity markets typically average around 12-15% annual returns over the long term, which is insufficient for such a short timeframe.

Recommended Horizon: For equity mutual funds, a minimum investment horizon of 5 years is recommended. This period allows your investments to recover from short-term dips and benefit from market upswings.

Alternative Investment Strategies
Given your goal and timeframe, here are some alternative strategies:

Debt Mutual Funds or Fixed Deposits:

Lower Risk: These options are more suitable for a short-term horizon of 3 years. While the returns are more modest (typically 6-8% annually), they offer greater capital protection.

Example: Investing in debt mutual funds or bank fixed deposits might help grow your wealth steadily, though it’s unlikely to reach Rs. 1 crore in 3 years.

Combination of Debt and Equity:

Balanced Approach: Consider a mix of equity and debt funds. This approach provides some exposure to potential market gains while protecting your capital with lower-risk debt instruments.

Example: Allocating 60% to equity funds and 40% to debt funds could provide a balanced risk-return profile.

Increase Investment Horizon:

Extend to 5 Years or More: If possible, extend your investment horizon to at least 5 years. This would make it more feasible to use equity mutual funds and increase the likelihood of achieving substantial returns.

Higher Monthly SIP: To reach Rs. 1 crore in 5 years, you would need to invest a substantial amount monthly in a well-performing equity mutual fund, but this is still a more realistic goal.

Final Thoughts:

Achieving Rs. 1 crore in 3 years through SIP is highly unlikely due to the short investment period and the risks associated with equity markets. Instead, consider extending your investment horizon or adjusting your expectations. For shorter-term goals, debt funds or fixed deposits may be more appropriate, though they offer lower returns. Always align your investment strategy with your financial goals and risk tolerance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.