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Ramalingam Kalirajan  |60 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2023

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
Nirmal Question by Nirmal on May 08, 2023Translate
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My son(27 yrs) wants to create an SIP of Rs.20K monthly for 20 years for Infosys and ITC each. How much wealth can he expected to create by this action at the end of 20th year. Is it a wise approach for weath creation.

Ans: Investing only in just 2 stocks may not be the right approach. Need to have reasonable diversification.
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.
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Can a SIP of Rs 2,000 per month for 20 years help me earn Rs 40 lakh? I would also be interested in doing a top-up SIP of Rs 1,000 after end of every year, and may be Rs 2,000 SIP top-up after three years. What kind of returns can I expect from this endeavor?
Ans: Whether a SIP of Rs 2,000 per month for 20 years with top-ups can help you earn Rs 40 lakh depends on the rate of return you achieve. Here's a breakdown:
Investment plan:
• Monthly SIP: Rs 2,000
• Investment period: 20 years (240 months)

Top-up SIP:
• Rs 1,000 annually
• Rs 2,000 after 3 years (one-time)

Possible returns:

It's impossible to predict future returns with certainty, but here's an estimate based on historical averages:

• Equity mutual funds: Historically, equity mutual funds in India have delivered average annual returns of around 12-15%. With this rate, you could reach Rs 40 lakh in approximately 15-17 years.
• Debt mutual funds: Debt funds offer lower returns but are less volatile. They typically yield 6-8% annually. At this rate, reaching Rs 40 lakh would take much longer, possibly exceeding 20 years.

Reaching Rs 40 lakh:

Based on the above, a return of at least 8% would be necessary to reach Rs 40 lakh within 20 years with your investment plan. Remember, this is just an estimate, and actual returns may vary significantly.

Using a SIP calculator:

For a more precise estimate, consider using a SIP calculator that factors in your investment details and desired return rate. Many online platforms offer such calculators.

Important factors to remember:

• Past performance is not indicative of future results. Mutual fund returns can fluctuate significantly depending on market conditions.
• Consider your risk tolerance. Equity funds offer higher potential returns but also carry greater risk. Choose a fund that aligns with your risk appetite.
• Seek professional advice. Consulting a financial advisor can help you create a personalised investment plan based on your goals and risk profile.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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