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My 2.5cr MF will grow to what in 10 years at 43?

Ramalingam Kalirajan |10894 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

Asked by Anonymous - Jun 25, 2024Hindi

Dear Financial Advisor, hope you are doing well. I am 43 and currently have 2.5cr MF through SIP. I am planning to stop considering my financial situation. I am not planning to take out this amount (2.5cr). Can you please let me know how much it will grow in 10 years if i dont withdraw it? thank you.

Ans: At 43 years old, you have accumulated Rs 2.5 crores in mutual funds through SIPs. This is a significant milestone and shows disciplined investing. Now, you’re considering stopping further SIP contributions due to your financial situation. You’ve also indicated that you don’t plan to withdraw the existing Rs 2.5 crores, which is a wise decision as it allows your investments to continue growing.

Expected Growth Over 10 Years
If you stop your SIPs but leave the Rs 2.5 crores invested, the amount will likely grow over the next 10 years, depending on several factors:

Market Conditions: The performance of your mutual funds will depend on how the market performs over the next decade. While markets are volatile in the short term, they generally tend to grow over the long term. Historically, equity mutual funds have delivered returns between 10% to 12% annually over a long period.

Fund Performance: The specific mutual funds you are invested in will have their own performance metrics. Actively managed funds can outperform the market, but they also come with higher risks compared to passively managed funds.

Compounding Effect: Since you plan to leave the money untouched, it will benefit from compounding, where the returns you earn also start earning returns. This compounding effect is crucial for long-term wealth accumulation.

No Withdrawals: By not withdrawing, you’re allowing the entire corpus to stay invested, maximizing growth potential.

Estimating Future Value
Let’s assume a conservative annual growth rate of 10% for the next 10 years:

In 10 years, your Rs 2.5 crores could grow significantly due to compounding. Even with conservative estimates, this amount could potentially double. However, actual returns will vary based on market performance and the specific funds you are invested in.

If your mutual funds achieve a 10% annual return, your corpus might grow to approximately Rs 6.5 crores in 10 years. This is not a guarantee but an estimate based on historical data.

If the market performs exceptionally well, and you achieve a 12% return, your corpus could grow even higher, possibly reaching around Rs 7.7 crores.

Evaluating the Decision to Stop SIPs
Stopping your SIPs might be necessary due to your financial situation, but it’s important to evaluate the long-term impact:

Weighing the Pros and Cons: Stopping SIPs means you won’t be adding fresh investments to your portfolio. While your existing Rs 2.5 crores will continue to grow, the absence of new contributions might limit the potential growth.

Opportunity Cost: If your financial situation improves in the future, consider resuming SIPs. Regular investments can help take advantage of market dips and boost your long-term returns.

Inflation Consideration: Over the next 10 years, inflation will erode the purchasing power of your money. Ensure that your investments are growing at a rate that outpaces inflation to maintain your wealth’s real value.

Diversification and Asset Allocation
It’s crucial to assess whether your current portfolio is well-diversified and aligned with your financial goals:

Risk Management: Depending on your risk tolerance, you may want to review the allocation between equity, debt, and other asset classes. While equity offers high growth potential, having some portion in debt funds can reduce overall portfolio volatility.

Rebalancing: As you near retirement, consider gradually rebalancing your portfolio to reduce exposure to high-risk assets and increase allocation to more stable investments.

Considering Professional Guidance
Given the complexities involved in managing a sizeable corpus, it might be beneficial to consult with a Certified Financial Planner:

Tailored Advice: A CFP can provide personalized advice, considering your overall financial situation, risk tolerance, and future goals.

Strategic Adjustments: They can help you make strategic adjustments, such as when to rebalance your portfolio or how to manage withdrawals post-retirement.

Planning for Future Financial Goals
With 10 years ahead, it’s a good time to think about your future financial needs:

Retirement Planning: Estimate your retirement corpus requirements and ensure that your current investments will meet these needs.

Wealth Transfer: If you have dependents, consider how you want to pass on your wealth. Estate planning is an important aspect of financial planning.

Final Insights
Your decision to stop SIPs and leave your Rs 2.5 crores invested is sound, given your current financial situation. Over the next 10 years, your investments will likely grow, potentially doubling or more, depending on market conditions.

However, don’t forget to review your portfolio periodically. Consider rebalancing your assets as you near retirement to protect your wealth from market fluctuations. If your financial situation improves, resuming SIPs can be a smart move to enhance your retirement corpus further.

Lastly, consider working with a Certified Financial Planner to ensure your investments align with your long-term 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.

My 2.5cr MF will grow to **what** in 10 years at 43?

My 2.5cr MF will grow to what in 10 years at 43?