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Monthly Income 1 Lakh, Can I Invest for 5 Cr Corpus in 25-30 Years?

Ramalingam Kalirajan |8077 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Oct 03, 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

Asked by Anonymous - Sep 25, 2024Hindi

I am earning 1 lakh per month, I pay 30000rs per month for home loans how much money should I invest in mutual funds so that I can get a corpus of around 5cr in 25-30 years

Ans: You want to build a corpus of Rs 5 crore over the next 25-30 years. With your current monthly salary of Rs 1 lakh and a home loan EMI of Rs 30,000, you still have the potential to invest a significant amount towards this goal.

Let’s break this down step by step and explore how much you should invest in mutual funds to reach your target.

Monthly Investment Calculation
Given your 25-30 years timeline, investing in equity mutual funds is a strong option. Historically, equity mutual funds have given returns of around 12-14% over the long term. However, to be more conservative, let's assume an average annual return of 12%.

You would need to invest approximately Rs 15,000 to Rs 18,000 per month consistently to achieve your Rs 5 crore goal in 25-30 years, considering an average return of 12%.

At 12% return, you’ll need to invest around Rs 15,000 monthly for 30 years.

For a 25-year timeline, your monthly investment would be around Rs 18,000.

This would help you achieve the Rs 5 crore corpus comfortably with regular SIPs in equity mutual funds.

Diversifying Your Investments
Instead of putting all your money in one mutual fund scheme, it’s best to diversify across various categories:

Large Cap Funds: These are stable and provide steady returns.

Mid Cap and Small Cap Funds: These come with higher risk but offer potentially higher returns over a long-term horizon.

Flexi Cap or Multi-Cap Funds: These funds invest across all market segments and offer flexibility.

By spreading your investments across these categories, you reduce risk while maximizing potential returns.

SIP Step-Up Strategy
Since you step up your SIP investments by Rs 5,000 to Rs 8,000 each year, you are following a good practice. Continue this step-up method to further accelerate your corpus. Increasing your investment as your income rises will help you reach your Rs 5 crore goal more comfortably.

Step-up ensures that you stay ahead of inflation and reach your target faster.

A 10% yearly increase in SIP amounts will significantly boost your wealth creation over the years.

Taxation on Mutual Funds
Keep in mind the tax implications:

Long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.

Short-term capital gains (STCG) are taxed at 20%.

It’s essential to plan your withdrawals to minimize tax outgo.

Avoid Index Funds and Direct Funds
Avoid index funds, as actively managed funds typically offer higher returns. You should also avoid direct funds because they require active tracking and management, which can be time-consuming. Instead, invest in regular funds through a Certified Financial Planner. This allows a professional to manage your portfolio efficiently while you focus on your goals.

Final Insights
You are in a good position to achieve your Rs 5 crore goal by age 60 with disciplined investments. Start with Rs 15,000 to Rs 18,000 monthly and continue stepping up annually. Diversify your portfolio and stay committed to your long-term plan.

If you maintain consistency and discipline, your investment journey will be smooth.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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.