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35 Lakh in 2 Years: How Much to Invest in MF SIP?

Ramalingam

Ramalingam Kalirajan  |7968 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 03, 2025

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
Imran Question by Imran on Dec 20, 2024Hindi
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First of all, thank you very much for your guidance and suggestions; they are greatly appreciated. I have a question: I need to accumulate 35 lakh in the next two years. How much should I invest in a mutual fund through a Systematic Investment Plan (SIP) on a monthly basis? Additionally, which mutual fund would provide the best returns? My budget for this investment is around 1 lakh monthly. If I invest 1 lakh, is it possible to reach 35 lakh after two to two and a half years?

Ans: Your goal is to accumulate Rs 35 lakh in the next two to two-and-a-half years. The timeline is short, making risk management a critical factor. Since mutual funds involve market-linked risks, the right strategy and fund selection are crucial. Your monthly budget of Rs 1 lakh is commendable and allows you flexibility in your investment strategy.

However, the returns are influenced by market conditions, and no mutual fund can guarantee a specific outcome.

SIP Investment Feasibility
For a target of Rs 35 lakh in two years, the required monthly SIP depends on the expected return rate. A short timeframe limits the compounding effect and increases reliance on consistent market performance. High returns often come with higher risk, which may not align with your time horizon.

Equity-oriented mutual funds, while offering potentially higher returns, are more volatile in the short term. Debt-oriented funds provide stability but may fall short in reaching your goal without a larger investment amount.

Given your budget of Rs 1 lakh per month, achieving Rs 35 lakh is possible with an annualized return of around 10–12%. However, this assumes consistent market performance and disciplined investing.

Evaluating Mutual Fund Options
Instead of focusing on a single mutual fund, consider a diversified approach:

Balanced Advantage Funds (BAFs): These funds manage risk by dynamically allocating assets between equity and debt. They offer moderate growth with reduced volatility.

Aggressive Hybrid Funds: Suitable for a short-term horizon, these funds invest a significant portion in equity while balancing with debt to reduce risk.

Debt-Oriented Mutual Funds: These funds provide stable returns and are less affected by market volatility. However, they may not deliver double-digit returns consistently.

Liquid and Ultra-Short Term Funds: Consider allocating a small portion here for liquidity needs or to park surplus cash temporarily.

Importance of Actively Managed Funds
Actively managed funds offer the expertise of fund managers, who can adjust the portfolio based on market conditions. These funds aim to outperform benchmarks and may deliver better returns than index funds, especially in volatile or underperforming markets.

Index funds merely replicate the market, offering average returns. Actively managed funds strive to generate alpha, which is critical for achieving your specific goal.

Limitations of Direct Funds
Direct funds may seem cost-effective due to lower expense ratios, but they lack professional guidance. Working with a Certified Financial Planner ensures proper fund selection, portfolio monitoring, and rebalancing. These services are crucial for a time-sensitive goal like yours.

Tax Implications
Be mindful of the latest mutual fund taxation rules:

Equity Funds:

LTCG (above Rs 1.25 lakh) is taxed at 12.5%.
STCG is taxed at 20%.
Debt Funds:

Both LTCG and STCG are taxed as per your income tax slab.
Taxation will impact your net returns, and a CFP can help optimize your tax liability.

Achieving Your Target
If you invest Rs 1 lakh monthly and aim for a conservative return of 10–12% annualized, reaching Rs 35 lakh is plausible. However, market volatility can influence this outcome.

Consider the following steps:

Start Immediately: Every month counts when your timeline is limited.

Review Portfolio Regularly: Periodic assessments help ensure the portfolio aligns with your goal.

Consider Lump Sum Investments: If you have surplus funds, parking them in debt funds or hybrid funds could provide additional growth.

Stay Disciplined: Avoid withdrawing funds prematurely to let your investments grow.

Finally
Achieving Rs 35 lakh in two years requires a strategic approach. Diversified mutual fund investments, combined with disciplined investing and expert advice, can bring you closer to your goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Asked on - Jan 06, 2025 | Answered on Jan 07, 2025
Thank you for your thorough response, Sir. I will perform a more detailed analysis as you recommended before proceeding with any investments and will allocate the funds accordingly.
Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

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.
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My son has got 91 percentile in the recent jee exam , he has next attempt in april, but i feel its difficult for him , can i know about other good colleges in karnataka , as im based their. interested in computer science and aeronautical degree, also advise some recent good courses for his career in india.
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Do not get stressed at this stage. Even though his score is 91 percentile in 1st attempt, he can do well in 2nd attempt. But from the safer side, ask him to appear in the Karnataka State Engineering Entrance Examination also. Even if he scores less in JEE on 2nd attempt, he may good college via the state entrance examination in CSE or aeronautical engineering as per your wish. For your reference, there are 10 colleges in India where you can get admission without a JEE score. To know more details, please copy and paste the following link into your browser- https://timesofindia.indiatimes.com/education/news/10-engineering-colleges-in-india-for-pursuing-btech-without-jee-main-2025-score/articleshow/118162587.cms.
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Till then, ask him to focus only on two engineering entrance exams. Best of luck to your son for upcoming exams.

If satisfied with the reply, please like and follow me, else ask again.
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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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