Financial freedom may sound like a lofty goal. However, you could potentially achieve this by making small, consistent decisions that may quietly compound over time, especially when accompanied by a realistic plan.
Building a Rs. 10 crore corpus by starting a monthly SIP (Systematic Investment Plan) of Rs. 15,000 might seem impossible at first glance, but with discipline, time, compounding and steady increments, you may potentially realise this goal.
This article tells you more about how to work towards a Rs. 10 crore corpus through mutual fund SIPs and the factors that influence this journey.
Table of Contents:
- Understanding the goal: Building ₹10 crore through mutual funds
- Step-by-step plan: Investing Rs. 15,000 monthly SIP to build Rs. 10 crore
- Why start early? The power of compounding in mutual funds
- Choosing suitable mutual fund schemes
- Tax benefits and financial planning for SIP investors in India
- Why choose Bajaj Finserv AMC for your Rs.10 crore mutual fund journey
Understanding the goal: Building ₹10 crore through mutual funds
A goal of Rs. 10 crore could translate to a retirement that is not dependent on anyone, financial security for your family, the ability to travel, support your children, and the comfort of knowing that money need not dictate your decisions.
For most people, saving Rs. 10 crore in a lifetime through traditional savings instruments may be challenging. Inflation reduces the value of money over time and fixed-income instruments may not offer inflation-beating return potential. So, if wealth accumulation is the goal, equities may be more suitable.
One way to invest in equities is through equity-oriented mutual funds, which give you access to a diversified and professionally managed basket of stocks and other assets. With discipline, patience, and suitable fund selection, your Rs. 15,000 per month SIP could turn from an expense into a potential long-term asset.
However, it is advised to remember that returns on fixed deposits/savings accounts are fixed, however, returns on mutual funds are subject to market risks.
Also Read: How to Build a Diversified Portfolio with Mutual Funds
Step-by-step plan: Investing Rs. 15,000 monthly SIP to build Rs. 10 crore
To work towards a Rs 10 crore goal, the first thing you need is time – an investment horizon of about 30 years. So, the sooner you start investing, the better. Second, you need to increase your SIP contributions over time, so that gradually, you build up to a larger principal despite starting out with a modest amount.
One way to automatically increase your SIPs is through a step-up or top-up SIP. Such a plan allows you to increase your contribution amount by a fixed percentage at regular intervals – such as a 10% annual increment.
A step-up SIP calculator can help you plan how to potentially achieve your goal. All you need to do is enter your SIP amount, step-up percentage, investment horizon and expected rate of return.
In this example, if you choose a starting SIP of Rs. 15,000, a return rate of 13%, a step-up rate of 8% a year, and an investment horizon of 30 years, the calculator will project a final corpus of Rs. 10.9 crore.
Do note that the calculator uses a fixed and assumed rate of return for its estimates. Actual returns depend on market movements, are not guaranteed, and may or may not be along expected lines.
The calculator is an aid, not a prediction tool. It may provide only an indicative picture.
Why start early? The power of compounding in mutual funds
Compounding is the engine that drives potential wealth creation. Movement in the first decade might feel slow. You might even doubt the process because the numbers may remain modest. But somewhere in the middle years, you may start seeing the real impact of potential compounding, with the potential growth picking up. This is why many late investors may struggle to catch up, even if they invest much higher amounts. By starting early, you could give your investment a powerful resource, which is time.
Also Read: Strategy To Build Wealth with Mutual Funds in India
Choosing suitable mutual fund schemes
Your choice of fund matters as much as your discipline. It is advised to look for schemes with consistent long-term performance*, strong fund management, and lower expense ratios.
If you prefer diversification, you invest across different categories of equity-oriented mutual funds, such as large cap funds for relative stability, flexi cap funds for diversified growth potential and index funds for relatively low-cost broad market exposure. It’s also important to stay invested despite market fluctuations. During market downturns, continuing your SIP allows you to purchase more units at lower prices because of rupee-cost averaging, although this depends on market behaviour and your risk comfort.
It is recommended to review your funds once a year, not every month, as frequent switching may result in exit loads and taxes, eating into the power of compounding.
*Past performance may or may not be sustained in future.
Tax benefits and financial planning for SIP investors in India
Investing in mutual funds through SIPs is not just about potential returns, you can also combine SIPs with tax planning. If you invest in ELSS (Equity Linked Savings Scheme) mutual funds, you could claim tax deductions of up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act, 1961, under the old regime. This reduces your taxable income while your money potentially grows for your future.
Equity mutual funds also offer tax exemption up to a certain limit on long-term capital gains (LTCG). If investments are held for more than a year, LTCG of up to Rs. 1.25 lakh in a financial year are tax-exempt. Thereon, the tax rate is 12.5%. This is more optimal than the short-term capital gains tax rate, which is 20% with no exemptions.
Why choose Bajaj Finserv AMC for your Rs.10 crore mutual fund journey
When working towards your financial milestone, you may consider investing with Bajaj Finserv AMC. With disciplined investment strategies and research-driven decision making, Bajaj Finserv AMC offers a structured approach to potential wealth creation, with a wide range of equity, hybrid, debt and index funds that may cater to a wide range of investor preferences and risk appetite.
Conclusion
Building a Rs. 10 crore retirement corpus is a gradual process that depends on consistency, time, and informed decision-making. A disciplined SIP approach, with periodic increments and a substantial investment horizon, may help you potentially achieve this goal. By focusing on long-term discipline rather than short-term movements, you could give your investments the opportunity to potentially grow meaningfully over the years.
FAQs:
How soon can I expect to achieve Rs. 10 crore with a Rs. 15,000 monthly SIP?
If your investments deliver an average annual return of around 13%, you could potentially expect to reach close to Rs. 10 crore in approximately 30 years with step-ups. The exact time depends on market performance, your fund selection, and whether you increase your SIP amount over the years as your income grows.
What happens if the market crashes during my SIP tenure?
If you have a long investment horizon, you may be able to tide over the market crash and give your investment time to potentially recover. A market crash may even work in your favour if you have invested in SIPs, because of rupee-cost averaging, which helps you purchase more units at lower prices, leading to higher potential gains when the market recovers. Stopping your SIP during a crash could be a mistake.
Can I increase or decrease my SIP amount over time?
Yes, you have full flexibility. You could increase your SIP when your income rises or reduce it temporarily if needed. Increasing it regularly, even by small percentages, might boost your final corpus over the long-term.
Are mutual funds safe for building such a large corpus?
Mutual funds are subject to market risks and cannot be deemed safe. However, over long horizons, equity mutual funds have historically delivered inflation-beating returns. By diversifying across different fund categories and staying invested for the long-term, you could potentially reduce risk and improve return potential.
Past performance may or may not be sustained in future.
How does inflation impact my Rs. 10 crore goal?
Inflation gradually erodes the value of money, meaning an amount of Rs. 10 crore may not hold the same purchasing power in the future as it does today. For long-term goals, instruments that have the potential to grow faster than inflation, such as equities, are suitable.
What tax benefits can I avail while investing in mutual funds?
You could claim a tax deduction of up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act, 1961, through ELSS funds under the old regime. Moreover, long-term capital gains of up to Rs. 1.25 lakh in a financial year are tax-exempt for equity mutual fund units held for more than a year.
