I have FD of 70 lac and opt for monthly interest payout. Almost I got Interest of 34K per month from FD and this interest amount I invested in Mutaul fund as SIP. Is it good approach for investment and remain safe without any risk? but I also want to generate atleast 3cr with this amount only within 15 year. Is it possible?
Ans: Your current strategy involves investing Rs. 70 lakhs in a fixed deposit (FD) with a monthly interest payout of Rs. 34,000. You then invest this interest as a Systematic Investment Plan (SIP) in mutual funds. This is a thoughtful approach that combines the safety of an FD with the growth potential of mutual funds. However, we can fine-tune this strategy to meet your goal of generating Rs. 3 crores in 15 years.
Safety of Fixed Deposits
Fixed Deposits are low-risk, ensuring capital protection. But they often provide returns that barely beat inflation. While the safety of your principal is almost guaranteed, your money may lose purchasing power over time. The real challenge is ensuring that your investment grows significantly enough to reach your Rs. 3 crore target.
Pros: Safe and secure, regular income.
Cons: Low returns, may not outpace inflation.
Growth Potential of Mutual Funds
By investing the interest from your FD into mutual funds through SIPs, you’re already taking a step towards higher growth. Mutual funds offer a variety of options, each with different risk levels and return potentials. Since you have a long-term horizon of 15 years, you can consider more aggressive options within the mutual fund space.
Equity Mutual Funds: These are ideal for long-term growth. Historically, equity funds have delivered higher returns compared to fixed deposits. With a 15-year horizon, you can afford the market's ups and downs.
Debt Mutual Funds: If you want lower risk, debt mutual funds offer better returns than FDs while maintaining some level of safety. However, they may not help you reach your Rs. 3 crore goal.
Hybrid Funds: These balance between equity and debt. They offer moderate risk with the potential for reasonable returns.
Disadvantages of Index Funds
While index funds track the market, they do not outperform it. They also lack flexibility and can limit returns when compared to actively managed funds. Actively managed funds, with professional oversight, can better navigate market conditions and potentially deliver superior returns.
Index Funds: Low-cost, but limited upside.
Actively Managed Funds: Higher potential returns, but come with slightly higher costs.
Regular vs Direct Mutual Funds
Investing in regular funds through a Certified Financial Planner (CFP) can provide you with professional advice tailored to your specific goals. Direct funds, while cheaper, require you to manage your investments on your own. The expertise of a CFP can help you select the right funds, rebalance your portfolio, and make adjustments based on market conditions.
Regular Funds: Offer expert guidance, potentially better returns.
Direct Funds: Lower costs but need active management.
Achieving Your Rs. 3 Crore Target
To reach Rs. 3 crores in 15 years, you'll need to reassess the current structure. Relying solely on the FD interest and SIPs may not be sufficient.
Increase SIP Contributions: Consider reinvesting some of the FD principal into equity mutual funds. This will increase your SIP amount and boost your chances of meeting your target.
Diversify Your Portfolio: Spread your investments across equity, debt, and hybrid funds. This diversification can provide a balance of safety and growth.
Review Periodically: Regularly review and adjust your investments with the help of a CFP. This ensures you stay on track towards your Rs. 3 crore goal.
Final Insights
Your current approach is a good starting point, but it needs adjustments to meet your ambitious target. Increasing your SIP contributions and focusing on a diversified mutual fund portfolio can significantly improve your chances of achieving Rs. 3 crores in 15 years.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
