Who wouldn’t like to have a sound financial corpus by the time they reach the age of retirement? Everyone has to retire someday, and expenses are something that need to be dealt with throughout life. This is why building a corpus to cover such responsibilities is essential. Now, keeping your earnings parked in an account might not be ideal, especially if you are aiming to grow your wealth. Investing your money is key, and one effective way of reaching your target in a specific period of time is to invest in mutual funds.
But is it possible to accumulate an amount of Rs 5 crore in, let’s say, 10 years through mutual fund investments? Now, this is definitely an ambitious target considering the fact that you might have to keep investing for this period of time along with taking care of your current financial obligations. For those who are wondering whether this is possible, let’s dive into the article to go through the investment plan to achieve this target.
How to accumulate Rs 5 crore in 10 years?
Now, you would first have to consider whether to invest in equity funds or debt funds. Since you are aiming for a high corpus, equity mutual funds would be a more suitable option in this case. This is because equity funds are known to potentially offer higher returns as compared to debt funds. However, do note that these funds involve a higher risk since their performance depends on market conditions.
For accumulating an amount of Rs 5 crore in a span of 10 years, assume the range of your investment returns is between 15-18%. If you choose to not go the SIP route and make a lump sum investment in one go, you will need to have an investment range of Rs 1-1.25 crore to achieve the financial target of Rs 5 crore in a period of 10 years.
How would the SIP mode work to create a corpus of Rs 5 crore in 10 years?
Most investors would choose to start SIPs to reach their financial goals for wealth creation since making a lump sum investment of such high amounts might not be feasible. So, to create a corpus of Rs 5 crore with an assumed rate of return ranging between 15-18%, you would need to invest in the range of Rs 1.48 – 2.17 lakh every month towards your mutual fund investment. Take a look at the following table to understand this more easily:
Now, the returns on mutual fund investments are not guaranteed and can fluctuate as per market conditions. So, the table above considers 3 different return rate outcomes, based on which the SIP requirements would differ. You would have to invest Rs 2.17 lakh every month to reach Rs 5 crore in 10 years if the rate of returns is 12%, Rs 1.81 lakh if the rate is 15%, and Rs 1.48 lakh if your investments are getting a high rate of 18%. While these are substantial amounts, monthly SIP investments can help you reach your financial goal of Rs 5 crore in the determined investment horizon of 10 years. To calculate returns on SIP, use SIP Calculator, which takes into account varying return rates based on market conditions.
3 ways to make an SIP more rewarding
- Keep investing in the face of market volatility
Equity funds are subject to market volatility, and while this can be stressful for investors, it is important to remain stable with mutual fund investments. Being impulsive with your investments can harm your long-term financial goals, so keep your SIP investments intact even in the face of market volatility.
- Increase SIPs whenever possible
With an increase in your salary over time, bumping up your SIP instalments could result in you achieving your financial goals sooner as well as accumulating a larger corpus. You can opt for step-up SIPs where you exercise the option of increasing your monthly SIPs by a fixed percentage at certain intervals.
- Aim for a long investment horizon
Investing through SIPs is the best way to take advantage of the power of compounding, which involves the interest earned on the investment getting added back to the principal amount. With the principal amount growing every year, so do your returns. By giving your investments more time with longer tenures, you let your money grow with the power of compounding.
While working hard to earn money is an important virtue, it is also essential to put your money to work to build your financial corpus. Profits earned on investment returns through the power of compounding over long-term investment horizons can help create substantial wealth. So, stay disciplined with your SIP investments, especially while facing market volatility. Also, keep reviewing the performance of your SIPs from time to time to ensure that you are on track to achieve your financial goal. You can also consult a financial advisor for guidance on your mutual fund investments and investment strategy.
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