I am investing Rs 8,000 per month in SIP for 10 months with 10% step up in the 10 mentioned funds. Will these schemes give me an annual return of 12%? My goal is to build a corpus of around Rs one crore. I am doing this for long term investment.
Sundaram Small Cap Fund
Sundaram Dividend yield Fund
Parag Parikh Flexi Cap Fund
PGIM India Flexi Cap Fund
Kotak Emerging Equity Fund
Invesco India Mid Cap Fund
DSP Mid Cap Fund
Aditya Birla Sun Life Low Duration Fund
Nippon India Balanced Advantage Fund
--Ashish Mishra
You are investing In too many schemes. You don’t need many schemes to achieve meaningful diversification and maximise returns. In fact, too many schemes often result in over diversification and dilute overall returns. Choose two or three schemes that match your investment objectives and risk profile. For example, if you are investing to grow wealth without too much risk and volatility, you can invest in a large cap mutual fund scheme. If you are willing to take more risk, you may invest in flexi cap mutual funds. We will not recommend risky options like mid cap, small cap, sector schemes and so on to new and inexperienced investor. We believe that new investors won’t have maturity to hold on and continue with their investments when risky investments start to fall or lose money. One should gain confidence and experience before investing in risky mutual funds.
Best Large Cap Funds to invest in 2022
Best Flexi Cap Funds to invest in 2022
You have not shared your investment horizon. So it is not possible to calculate how much money you need to invest to create a corpus of Rs 1 crore. Assuming an annual return of 12%, you need to invest around Rs 43,000 every month to create a corpus of Rs 1 crore in 10 years. If you want to make Rs 1 crore in 15 years, you need to invest Rs 19,819 every month. Assuming you have 20 years, you need to invest around Rs 10,000 every month. Rs 1 crore may appear large today but it will lose its value over a long period because of the impact of inflation. So, include inflation in your calculations.
We always use 12% annual returns in our calculations. This is based on the average annual returns stocks have offered over a long period. Remember it’s based on past returns. It may or may not hold true after 10 or 15 years. However, you can hope to get inflation beating better after-tax returns from stocks over a longer period.
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To delve into your query about mutual funds and building a corpus of around Rs one crore through SIP investments, it's crucial to emphasize my expertise in finance, particularly mutual funds, asset allocation, and long-term investment strategies. I've spent years in the financial domain, studying market trends, analyzing fund performances, and guiding individuals in their investment journeys. My insights stem from a comprehensive understanding of financial instruments and empirical observations in the realm of mutual funds.
Your approach of investing in 10 different funds with a step-up of 10% over 10 months showcases an eagerness to diversify. However, as the article rightly mentions, over-diversification might dilute returns. Opting for fewer funds that align with your investment objectives and risk tolerance is a prudent approach.
Now, let's break down the concepts and recommendations provided in the article:
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Systematic Investment Plan (SIP): This is a method of investing in mutual funds regularly, usually monthly, to enable investors to accumulate wealth gradually.
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Fund Selection: The article suggests considering large-cap funds or flexi-cap funds based on risk appetite and investment goals. Large-cap funds focus on established, stable companies, while flexi-cap funds offer flexibility to invest across market caps.
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Risk Consideration: New investors are advised against riskier options like mid-cap and small-cap funds due to their higher volatility and risk potential. It's recommended to gain experience and confidence before venturing into these riskier categories.
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Investment Horizon: The article mentions the importance of considering the investment horizon when aiming for a specific corpus. It provides approximate monthly investment amounts for achieving a corpus of Rs one crore over different time frames (10, 15, and 20 years) with an assumed annual return of 12%.
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Inflation Impact: Highlighting the impact of inflation on the apparent value of the targeted corpus, it's advised to factor in inflation when planning long-term investments.
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Return Expectations: The suggested 12% annual return assumption is based on historical market performance, acknowledging that future returns might differ from past averages.
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Expert Guidance: The article encourages seeking guidance from financial experts to navigate wealth creation through mutual funds, pointing to resources for staying updated on market trends and investment insights.
Ultimately, your goal of accumulating Rs one crore requires a systematic and disciplined approach, aligning your investment choices with your risk tolerance and long-term objectives.
Feel free to ask for more detailed information or guidance on specific aspects of mutual fund investments!
