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I earn 1 Lakh/month, pay 30,000rs for a home loan. How much to invest for a 5cr corpus in 25-30 years?

Milind

Milind Vadjikar  |702 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Sep 28, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Sep 25, 2024Hindi
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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 may do a sip of 22 K for 25 years or a sip of 12 K for 30 years to reach your corpus of 5 Cr, as desired. Modest return of 13% assumed from a pure equity fund.

Happy Investing!!

You may follow us on X at @mars_invest for updates.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing.
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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Asked by Anonymous - Sep 25, 2024Hindi
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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

..Read more

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Milind

Milind Vadjikar  |702 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 26, 2024

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Hi Experts, I seek your guidance on my mutual fund portfolio. Below are the details: Total Portfolio Details: - Total Invested Amount: ?15,76,159 - Current Value: ?19,35,234 - Total Returns: ?3,59,075 (+22.78%) - XIRR: 20.75% Monthly SIP Contribution: ?1,18,000 Breakdown of monthly SIP contributions across funds: 1. Parag Parikh Flexi Cap Fund Direct Growth – ?30,000 2. SBI Large & Midcap Fund Direct Plan Growth – ?15,000 3. SBI Magnum Mid Cap Fund Direct Plan Growth – ?20,000 4. Nippon India Large Cap Fund Direct Growth – ?30,000 5. Nippon India Small Cap Fund Direct Growth – ?7,500 6. ICICI Prudential Technology Direct Plan Growth – ?10,000 7. Quant Small Cap Fund Direct Plan Growth – ?7,500 8. HSBC Small Cap Fund Direct Growth – ?5,000 9. Edelweiss US Technology Equity Fund of Funds Direct Growth – ?5,000 Can you suggest if I am on track to create 5 CR corpus in 10 years I have ?25 lakh invested in a Fixed Deposit (FD) in my mother’s account, earning an interest rate of 7.75%, to generate tax-free returns. Additionally, I’m planning to purchase a plot worth ?30–50 lakh in the next 1–2 years. Is it a good idea to keep the money in FD for now, or are there better short-term investment options I should consider to maximize returns while keeping the funds accessible for my future purchase? Looking forward to your suggestions! Thank you!
Ans: Hello;

Your monthly sip value adds upto 1.3 L however you have claimed it to be 1.18 L. (Maybe a typo).

Existing corpus(19.35 L) and monthly sip (1.3 L) won't reach 5 Cr in 10 years.

You have two options to make it happen:

1. Increase monthly sip amount to 1.9 L.

2. Top-up current monthly SIP of 1.3 L by minimum 10% each year for 10 years.

Both ways will lead you to a corpus of 5 Cr over 10 years.

You may consider money market mutual funds for parking your funds for a 1 year horizon. Returns may be comparable to FD returns but with flexibility to withdraw anytime. They typically have low to moderate risk.

Happy Investing;
X: @mars_invest

...Read more

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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