Mutual fund calculator: Systematic Investment Plan (SIP) is one of the most popular investment tools among Indian millennial because mutual fund SIP allows an investor to accumulate whopping amount with small monthly investment. According to tax and investment experts, mutual fund SIP investment for long-term allows an investor to get compounding benefit by getting interest on interest that helps maximisation of one's return on money. However, they advised investors to enhance their monthly investment using annual step-up in SIP. They said that annual step-up in monthly SIP helps an investor avail more financial freedom post-retirement.
Mutual fund return calculator
According to tax and investment experts, if an investor invests ₹10,000 per month in mutual fund SIP for 30 years, he or she can accumulate around ₹12.7 crore at the time of maturity provided it has used 10 per cent annual step-up.
Speaking on mutual fund investments; SEBI registered tax and investment expert Jitendra Solanki said, "Mutual fund investments are subject to market risk but in long-term this market risk goes down and chances of higher return scales much high. So, if an investor opts for mutual fund SIP investment, then the investor would be able to start with small amount and accumulate big amount in long term. But, one should increase one's monthly SIP with increase in one's annual income using annual step-up in monthly SIP amount."
On how much annual step-up one should opt while investing in SIP; Kartik Jhaveri, Director - Investments at Transcend Capital said, "Ideal practice is 10 per cent annual step-up in one's monthly SIP as one would get at least 10 per cent increase in one's annual income. So, raising monthly SIP in sync with rise in one's monthly income won't be a hectic task for an investor."
On mutual fund interest rate one can expect on 30 year long-term SIP investment, Kartik Jhaveri said, "On long-term investment like 30 years or more, one can expect at least 12 per cent annual return, which may go up to 16 or may be 17 per cent as well. On an average, one can expect around 15 per cent return on one's mutual fund SIP investment for 30 year long period provided the plan has been chosen properly."
Mutual fund SIP calculator
So, assuming 15 per cent return on one's monthly SIP, if an investor starts investing ₹10,000 per month using 10 per cent annual step-up and he goes on to invest for 30 years, the SIP calculator suggests that one can expect to get ₹12,69,88,106 or ₹12.70 crore maturity amount.
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Now, the question is, how one should use this ₹12.70 crore to live one's post-retirement life with more financial freedom? Tax and investment experts answered in SWP (Systematic Withdrawal Plan). They said that like SIP in pre-retirement phase, one can opt SWP in post-retirement phase where putting a lump sum amount helps create regular monthly income.
On how much monthly income one can expect after investing ₹12,69,88,106 in SWP; Vinit Khandare, CEO & Founder at MyFundBazaar said, "For investing ₹12.69 crore in SWP for 30 years expecting 8 per cent return per annum, one can expect a monthly income of around ₹9 lakh."
Asked about the mutual fund SIP investment plans that can give 15 per cent annual return in long-term, Vinit Khandare of MyFundBazaar listed out the following SIP plans:
Small-cap Fund: SBI Small Cap Fund - Regular Growth;
Mid-cap Fund: Aditya Birla Sun Life Mid Fund - Plan - Growth Regular Plan; and
Large-cap Fund: HDFC Top 100 Fund - Regular Plan - Growth.
Disclaimer: The views and recommendations made above are those of individual analysts or personal finance companies, and not of Mint.
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Published: 28 Nov 2021, 07:38 AM IST
It seems like the article dives into the world of mutual fund investments in India, specifically focusing on Systematic Investment Plans (SIPs), compounding benefits, retirement planning, and post-retirement income strategies like Systematic Withdrawal Plans (SWPs). Here's a breakdown of the key concepts mentioned:
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Systematic Investment Plan (SIP): This is a popular investment tool among Indian millennials, allowing investors to accumulate a significant amount over time by making small monthly investments. It capitalizes on the compounding effect, where the interest on the invested amount generates additional interest.
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Annual Step-Up in SIP: Experts recommend increasing monthly SIP investments annually to align with the rise in income. This strategy aims to enhance savings and accumulate more funds, especially for post-retirement financial freedom.
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Mutual Fund Returns: Long-term investments in mutual fund SIPs can potentially yield returns ranging from 12% to 17%, with an average expected return of around 15% over 30 years if the plan is chosen wisely.
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SWP (Systematic Withdrawal Plan): Similar to SIP during the pre-retirement phase, SWP in the post-retirement phase allows investors to create regular monthly income by investing a lump sum amount.
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Expected Post-Retirement Income: Investing around ₹12.7 crore in SWP for 30 years with an expected return of 8% per annum might generate a monthly income of approximately ₹9 lakh.
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Recommended Mutual Fund SIP Plans: Some specific mutual fund SIP plans mentioned for potentially achieving around a 15% annual return include:
- Small-cap Fund: SBI Small Cap Fund - Regular Growth
- Mid-cap Fund: Aditya Birla Sun Life Mid Fund - Plan - Growth Regular Plan
- Large-cap Fund: HDFC Top 100 Fund - Regular Plan - Growth
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Risk Factor: It's important to note that mutual fund investments are subject to market risks, although in the long-term, these risks tend to decrease while the potential for higher returns increases.
These insights are valuable for anyone interested in understanding the dynamics of SIP investments, retirement planning, and post-retirement income strategies in the Indian investment landscape.
