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Will investing 10,000 per month in SBI Magnum Children's Benefit Fund for 18 years help me reach my goal of 2 Crores?

Ramalingam

Ramalingam Kalirajan  |6568 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 04, 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
Senthil Question by Senthil on Sep 04, 2024Hindi
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I am investing 10000 every month in SBI Magnum Children's Benefit Fund - Investment Plan - Direct Plan - Growth. Will it be sufficient to obtain 2 Cr returns in 18 years of time from now

Ans: You are investing Rs. 10,000 every month in a children's benefit fund. Your goal is to accumulate Rs. 2 crore in 18 years. This is a significant target and needs a well-structured plan.

Understanding Your Investment Strategy
Investing in a mutual fund focused on children's education is a good start. This fund is designed for long-term goals and offers growth potential. However, it’s important to assess if your current investment will meet your target.

Estimating Future Returns
To reach Rs. 2 crore in 18 years, your investment must grow consistently. The rate of return plays a crucial role here. Most equity-focused funds aim for a return of 10-12% annually. However, these returns are not guaranteed and depend on market performance.

Power of Compounding
The concept of compounding is key to reaching your goal. When your returns are reinvested, they generate further returns, leading to exponential growth. Over 18 years, compounding can significantly boost your investment.

Monthly Investment Amount
Currently, you are investing Rs. 10,000 per month. Over 18 years, this equals Rs. 21.6 lakh in total contributions. For this to grow to Rs. 2 crore, your investments need to achieve a high rate of return.

Potential Growth Scenarios
If your investment grows at an average rate of 12% per year, reaching Rs. 2 crore is achievable. However, this assumes consistent growth and no major market downturns. Market fluctuations can impact your returns, so it's essential to stay invested for the long term.

Importance of Diversification
Relying on a single fund may not be enough to meet your goal. Diversifying your investments across different funds can spread risk and potentially enhance returns. Consider adding more funds with different investment strategies to your portfolio.

Actively Managed Funds vs. Index Funds
You’ve chosen a direct plan, which typically has lower expenses but lacks professional guidance. While this may save costs, actively managed funds, with a Certified Financial Planner (CFP) guiding you, can be more beneficial. They allow for strategic decisions to maximize returns, especially in volatile markets.

Why Direct Plans May Not Be Ideal
Direct plans are often chosen for their lower expense ratios. However, they don’t come with the personalized advice that regular plans offer through a CFP. This advice can help you navigate market changes and adjust your investments accordingly. Regular plans might have higher expenses but the professional management can help optimize returns.

Staying Disciplined with SIPs
Your SIPs (Systematic Investment Plans) provide discipline in investing. Regular investments, regardless of market conditions, help you build wealth over time. This approach reduces the impact of market volatility and keeps you on track to meet your goal.

Reviewing Your Investments Regularly
It's crucial to review your portfolio regularly. As you approach your target date, you may need to adjust your investments. Moving some of your funds to safer assets can protect your accumulated wealth.

Consider Inflation
Inflation can erode your purchasing power over time. Even if you reach Rs. 2 crore, the real value might be less than expected due to rising costs. It’s important to factor in inflation while planning your financial goals.

Tax Implications
Consider the tax impact on your investments. Long-term capital gains (LTCG) from equity funds above Rs. 1.25 lakh are taxed at 12.5%. Understanding tax implications can help you plan better and maximize your returns.

Adjusting Your Investment Strategy
If you find that your current investment plan may fall short, consider increasing your monthly SIP amount. Even a small increase can have a big impact over 18 years due to compounding.

Avoiding Common Investment Mistakes
It’s important to avoid common pitfalls like withdrawing your investments during market downturns. Staying invested and trusting the long-term growth potential of your funds is key to achieving your financial goals.

Final Insights
Reaching Rs. 2 crore in 18 years with a Rs. 10,000 monthly investment is possible, but not guaranteed. It requires a disciplined approach, regular reviews, and possibly an increase in your SIP amount. Working with a Certified Financial Planner can provide you with the guidance needed to navigate market changes and optimize your investment strategy.

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.
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Ramalingam

Ramalingam Kalirajan  |6568 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Asked by Anonymous - Apr 25, 2024Hindi
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Hi sir, i am 37. Investing 15000 in 04 MFs, 37500 total in 02 PPFs and 01 SSY, 20000 in NPS each month. I've 1 daughter and 1 son of 7 yrs and 3 yrs respectively. Is it sufficient for me in future?????
Ans: It's wonderful to see your proactive approach towards securing your family's future. Let's delve into your financial planning:
• Comprehensive Investment Approach: You've adopted a well-rounded investment strategy by diversifying across mutual funds, PPFs, SSY, and NPS. This approach spreads risk and maximizes growth potential.
• Planning for Children's Future: Investing in PPFs, SSY, and NPS for your children's education and future needs is a prudent move. These instruments offer tax benefits and long-term growth potential, ensuring financial security for their milestones.
• Assessing Sufficiency: While your current investment allocation is commendable, it's essential to periodically review and reassess your financial goals and resources. As your children grow and educational expenses increase, you may need to adjust your investment contributions accordingly.
• Long-Term Perspective: With a diversified portfolio and disciplined savings habit, you're on the right track towards achieving your financial objectives. Keep a long-term perspective and stay committed to your investment plan.
• Professional Guidance: Consider consulting with a Certified Financial Planner periodically to review your financial plan, assess progress towards goals, and make necessary adjustments. A CFP can provide personalized advice based on your evolving needs and market conditions.
• Encouragement: Your proactive approach towards financial planning reflects your commitment to securing your family's future. Stay focused on your goals, continue to invest systematically, and remain adaptable to changing circumstances.
• Final Thoughts: By adopting a disciplined and diversified investment strategy, you're laying a solid foundation for your family's financial well-being. Stay consistent with your savings and investment habits, and you'll be well-prepared to meet your future financial needs.

..Read more

Ramalingam

Ramalingam Kalirajan  |6568 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

Ramalingam

Ramalingam Kalirajan  |6568 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 15, 2024

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Hello Sir I am now 27 investing in SBI Contra Fund of amount 1111/- , SBI Psu Fund of amount 1111/-, Aditya Birla Psu Equity Fund of Rs 1111/-,Nippon India Large Cap Fund of Rs 1111/-,Tata Small Cap Fund of Rs 1111/-. Also have an daily SIP On Paytm app of Rs 101/- for 30 years as an return expected for Rs 1 crore. Is I am on the right track to achieve my Goal. And also have a question regarding mutual fund SIP That at how many years can I build the wealth for my child for his educational purpose.
Ans: Firstly, let me commend you on your proactive approach towards investing at the age of 27. Starting early gives you a significant advantage in wealth creation due to the power of compounding. You have a diversified portfolio with investments in various mutual funds, including contra funds, PSU funds, large cap funds, and small cap funds. Additionally, your daily SIP through Paytm shows your commitment to regular investing, which is crucial for achieving long-term financial goals.

Assessing Your Investment Portfolio
Diversification and Fund Types
Your portfolio includes a mix of different types of funds:

Contra Funds: These funds invest in undervalued stocks, betting on a turnaround. They can offer high returns but come with higher risk.

PSU Funds: These funds focus on public sector units. They can be stable but might not always outperform the market.

Large Cap Funds: These invest in large, established companies. They are relatively stable with moderate returns.

Small Cap Funds: These invest in smaller companies. They have high growth potential but also come with higher volatility.

While diversification is good, it's essential to ensure that each fund aligns with your overall risk tolerance and investment goals.

Benefits of Actively Managed Funds
It's commendable that you're investing in actively managed funds rather than index funds. Actively managed funds have the potential to outperform the market due to the expertise of fund managers. They can adapt to market changes and invest in high-growth opportunities.

Index funds, on the other hand, simply replicate the market index. They may not capitalize on opportunities that active managers can. By choosing actively managed funds, you benefit from professional management aimed at higher returns.

Disadvantages of Direct Funds
You mentioned investing directly, possibly through platforms like Paytm. While direct funds have lower expense ratios, they lack the personalized advice that comes with investing through a Certified Financial Planner (CFP). A CFP can provide tailored advice, helping you choose funds that align with your financial goals and risk tolerance.

Evaluating Your SIP Strategy
SIP Amounts and Goals
Your SIP amounts are well-structured. Investing Rs 1111 in each fund shows a disciplined approach. The daily SIP of Rs 101 is unique and reflects your commitment to continuous investing. However, it's crucial to periodically review and increase your SIP amounts as your income grows to ensure you meet your long-term goals.

Setting Financial Goals
Goal for Child's Education
Building wealth for your child's education is a noble goal. The duration for achieving this goal depends on several factors, including the amount you invest, the expected rate of return, and the future cost of education.

Typically, education costs rise with inflation. Therefore, it's wise to estimate the future cost and plan accordingly. Regularly reviewing and adjusting your investments can help ensure you stay on track.

Creating a Comprehensive Financial Plan
Assessing Your Risk Tolerance
Understanding your risk tolerance is essential. Since you are young, you can afford to take more risks. However, as you approach significant financial goals, like your child's education, you may want to shift towards more stable investments.

Regular Reviews and Adjustments
It's crucial to review your portfolio periodically. Market conditions change, and so do your financial goals. Regular reviews with a CFP can help you make necessary adjustments to your portfolio.

Importance of a Certified Financial Planner
While direct investments through apps are convenient, they may not offer the comprehensive planning that a CFP provides. A CFP can help you create a detailed financial plan, considering your income, expenses, risk tolerance, and long-term goals. They can offer personalized advice, ensuring your investments align with your objectives.

Building Wealth for Your Child's Education
Time Horizon and Investment Strategy
The time horizon for your child's education will influence your investment strategy. If your child is young, you have a longer investment horizon, allowing for more aggressive investments. As the time for education approaches, you may want to shift towards more conservative investments to protect your accumulated wealth.


I understand that planning for your child's future can be overwhelming. It's commendable that you are taking these steps early on. Investing regularly and seeking professional advice shows your commitment to providing the best for your child's future.


You are doing a fantastic job by starting early and diversifying your investments. Your disciplined approach to SIPs and your commitment to your child's education reflect your dedication and foresight.

Final Insights
In conclusion, you are on the right track with your investments. However, regular reviews and adjustments are essential to ensure you meet your goals. Consider working with a Certified Financial Planner to get personalized advice and make the most of your investments. This approach will help you build a secure financial future for you and your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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