In the quest for financial security and a comfortable retirement, it's crucial to make informed investment decisions. Vijay Kumar Virnave, a 25-year-old professional with a monthly take-home salary of around ₹40,000 and no outstanding loans, has set an ambitious goal for his future - accumulating ₹11 crore by the time he turns 50. However, Vijay prefers not to invest directly in the stock market. Is his goal achievable, and what investment strategy can help him get there? We explore these questions in detail.
The Expert Perspective
Kartik Jhaveri, Manager — Wealth at Transcend Capital, weighs in on Vijay's financial aspiration. With no financial burdens like loan repayments, it's indeed possible to amass ₹11 crore in the next 25 years. However, this goal necessitates a well-considered plan. Since Vijay is averse to direct stock investments, the most suitable alternative is a Systematic Investment Plan (SIP) in the equity mutual funds category. SIPs offer the potential for the kind of returns required to reach this ambitious milestone. Nevertheless, to maintain a manageable monthly SIP, Vijay should adopt an annual step-up approach.
Annual Step-Up Strategy
Jitendra Solanki, a SEBI registered tax and investment expert, suggests an annual SIP step-up. While a 10% annual increase is the typical practice, given Vijay's ambitious target, a 15% annual step-up is considered a safer option. This strategy involves progressively increasing the SIP amount each year, ensuring that Vijay's investments align with his goal.
Expected Returns
Jitendra Solanki reminds us of the "15 x 15 x 15" rule of mutual funds. According to this rule, one can expect a 15% return on their equity mutual fund investments over a span of 15 years. Given Vijay's 25-year investment horizon, he can anticipate approximately a 15% return on his investments. This return rate plays a crucial role in determining the SIP amount required to accumulate ₹11 crore over 25 years.
Mutual Fund Return Calculator
Assuming a consistent 15% annual return and maintaining a 15% annual SIP step-up, a SIP calculator suggests that Vijay should start with a monthly SIP of ₹12,000. This strategic approach will enable him to accumulate the desired ₹11 crore by the time he turns 50.
Choosing the Right Mutual Fund SIP Plans
To achieve a 15% return on mutual fund investments in the long term, it's essential to select the right funds that align with your risk appetite. Vinit Khandare, CEO & Founder at MyFundBazaar India Private Limited, recommends considering small-cap, mid-cap, or large-cap funds based on your investment preferences. Here are some mutual fund SIP plans that may be suitable:
- 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.
Achieving financial goals requires a well-thought-out plan and disciplined execution. By adopting a strategic SIP approach, Vijay can set himself on the path to accumulating ₹11 crore by the time he reaches 50. This investment strategy, combined with prudent fund selection, will help him secure a comfortable financial future.
Remember that financial planning is a critical aspect of one's life journey. It's essential to consult a financial advisor to tailor investment strategies to your unique circ*mstances. Vijay's ambitious goal is attainable with the right approach and a commitment to disciplined investing.
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Achieving financial success requires dedication and informed choices. With a well-planned approach, Vijay can reach his financial goals and secure his future.
