Hello, I am 20 Years old and my name is DEVAGYA. I want to generate around 50 crores in the next 15 years for my STABLISH NEW BUSINESS FOR MY child's education. Please suggest the SIP amount and the funds that will help me achieve this target?

Ans: Hello,

Glad to know that our names are same. Secondly, you also have your financial goals mentioned which is really a good sign to more forward with structured investment and tracking of your investments.

Looking at your requirement, please find the below solution from my side.

1) I am supposing that both your goals are maturing in the same year after 15 years.

2) I am assuming the returns of 12% and i am assuming that the figure which you have mentioned is already inflation adjusted which is Rs 5 crore.

Based on this information and assumption, you should have SIP of Rs 1,07,000.

I would recommend to invest in following funds:

1) large & Midcap Fund- 25%
2) Midcap Fund- 25%
3) Flexicap Fund- 25%
4) First Small Cap Fund- 13%
5) Second Small Cap Fund- 12%

You can select any good fund in these categories and stick to it for long term until and unless there are not any major changes to the fund.

Remember one thing, investment is not about selecting the best funds but 95% success in fulfilling your financial goal is managing your emotions and behavior in your journey of wealth creation.

I hope this will help you... Happy Investing...

Disclaimer: This information is only for educational purpose and it should not be taken as buy or sell recommendation. I may or may not have any position in these mutual funds or stocks while answering this question.

Ans: Please do SIP in actively managed diversified equity funds which are performing consistently.

Ans: Investing with a goal in mind is much like planting a tree. The earlier and more diligently you nurture it, the stronger and more fruitful it grows over time. To aim for a 50 lakh corpus in 15 years, starting early and being consistent with your SIPs is key.

Considering the time horizon and your risk appetite, diversifying across different asset classes might be a wise strategy. It's a bit like cooking a balanced meal, where each ingredient plays a vital role in the overall taste and nutrition.

Remember, the journey of investing is as important as the destination. It's not just about the numbers but also about creating a financial discipline and understanding the markets. A Certified Financial Planner can guide you through this journey, helping you navigate the complexities and ensuring you stay on track.

So, let's embark on this journey together, nurturing your investments and watching them grow towards your goal.

Ans: Firstly, commendations on taking proactive steps towards securing your financial future by investing in SIPs. It’s great to see your commitment and consistency in building wealth through mutual funds.

Current Investment Analysis
Your Current SIPs:

Nippon India Small Cap Fund: Rs. 2,000 monthly
HDFC Midcap Opportunities Fund: Rs. 1,000 monthly
Quant Small Cap Fund: Rs. 1,000 monthly
SBI Contra Fund: Rs. 2,500 monthly
Total Monthly Investment: Rs. 6,500

Calculating Future Value of Current Investments
To determine if your current SIPs will help you reach your goal of Rs. 50 lakh in 10 years, let's calculate the future value. Assuming an average annual return of 12%, the future value of your SIP can be estimated using the formula for the future value of an SIP:

Future Value (FV) = P × [ (1 + r)^n - 1 ] / r × (1 + r)

Where:

P is the monthly investment (SIP amount)
r is the monthly rate of return (annual return / 12)
n is the total number of investments (months)
For a 12% annual return:
r = 12/100 / 12 = 0.01

Total months n = 10 × 12 = 120

Let's calculate the future value for each SIP:

Nippon India Small Cap Fund
P = 2000
FV = 2000 × [ (1 + 0.01)^120 - 1 ] / 0.01 × (1 + 0.01)
FV = 2000 × [ 1.01^120 - 1 ] / 0.01 × 1.01
FV = 2000 × 232.97 × 1.01
FV ≈ 4,70,000

HDFC Midcap Opportunities Fund
P = 1000
FV = 1000 × 232.97 × 1.01
FV ≈ 2,35,000

Quant Small Cap Fund
P = 1000
FV = 1000 × 232.97 × 1.01
FV ≈ 2,35,000

SBI Contra Fund
P = 2500
FV = 2500 × 232.97 × 1.01
FV ≈ 5,87,000

Adding these, the total future value of your current SIPs will be:
4,70,000 + 2,35,000 + 2,35,000 + 5,87,000 = 15,27,000

Gap Analysis and Required SIP
Your goal is to accumulate Rs. 50 lakh, but your current SIPs will accumulate approximately Rs. 15.27 lakh. This leaves a shortfall:

Required Amount: Rs. 50 lakh

Current Future Value: Rs. 15.27 lakh

Shortfall: Rs. 50 lakh - Rs. 15.27 lakh = Rs. 34.73 lakh

To reach Rs. 50 lakh, you need to invest more. Let’s determine how much you need to invest monthly to bridge this gap.

Using the SIP future value formula, let's solve for P (the required monthly SIP amount) to reach Rs. 50 lakh:

50,00,000 = P × [ (1 + 0.01)^120 - 1 ] / 0.01 × (1 + 0.01)

50,00,000 = P × 232.97 × 1.01

50,00,000 = P × 235.30

P = 50,00,000 / 235.30

P ≈ 21,250

You need to invest approximately Rs. 21,250 per month to reach your goal of Rs. 50 lakh in 10 years, assuming a 12% annual return.

Reviewing Your Current Investments
Fund Performance and Diversification

Nippon India Small Cap Fund: Good for aggressive growth, but high risk.
HDFC Midcap Opportunities Fund: Balanced growth and risk.
Quant Small Cap Fund: Another high-risk, high-return option.
SBI Contra Fund: Contrarian approach, can offer good returns in underperforming sectors.
Your portfolio has a mix of small-cap, mid-cap, and contrarian strategies. It’s relatively aggressive, which is suitable for a long-term horizon but may need some balancing for risk management.

Suggestions for Portfolio Adjustment
Increase Investment Amount

To reach your goal, increase your monthly SIP to Rs. 21,250. You can adjust the distribution among existing funds or add new funds.

Diversification

Consider adding large-cap or multi-cap funds to diversify and reduce risk. Large-cap funds typically offer more stability and can balance the high-risk small-cap and mid-cap funds in your portfolio.

Why Actively Managed Funds
While index funds are popular, actively managed funds can provide better returns due to the expertise of fund managers. They can make strategic decisions and adapt to market conditions, potentially outperforming the index.

Direct vs. Regular Funds
Investing in direct funds saves on expense ratios, but it requires active management and market knowledge. Regular funds, through a Mutual Fund Distributor (MFD) with Certified Financial Planner (CFP) credentials, provide professional advice and management, which can be beneficial.

Conclusion
To achieve your goal of Rs. 50 lakh in the next 10 years, you need to increase your SIP to Rs. 21,250 per month. Diversify your investments to include large-cap or multi-cap funds to balance risk. Consider the benefits of actively managed funds and professional advice through regular funds.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in