Make Your Money Work for You: Start Investing in Mutual Fund SIP and Reach 100 Crore Rupees in 30 Years

Personal Finance Updates: Mutual funds have become an increasingly popular investment option among investors due to their potential to provide higher returns as compared to traditional investment options such as fixed deposits and savings accounts. Additionally, mutual funds also offer the benefit of diversification, which reduces the risk associated with investing in a single stock or asset class.

Equity mutual funds, in particular, are suitable for investors who are willing to take higher risks and are looking for long-term wealth creation. According to wealth advisors, equity mutual funds can be the answer to an investor's query of 'how to become rich.' However, it is important to note that mutual funds are subject to market risks and past performance is not an indication of future returns.

Systematic Investment Plan (SIP) is one of the most popular ways to invest in mutual funds. SIP involves investing a fixed amount of money at regular intervals (usually monthly) for a specific period. The biggest advantage of SIP is that it helps an investor

to get the average of the returns given by the mutual fund plan over the period of investment. When an investor opts for a SIP, they invest a predetermined amount of money at fixed intervals, which results in the purchase of more units of the mutual fund when the market is performing poorly and fewer units when the market is doing well. This strategy is called rupee cost averaging and helps in reducing the overall cost of investment and mitigating the risk associated with timing the market.

Mutual fund advisers suggest that a long-term investor should go for a mutual fund SIP and start it as soon as possible, as every time is a good time to start a mutual fund SIP. They believe that if an investor is disciplined enough, then starting a monthly SIP with around ₹20,500 to ₹21,000 amount can help him or her accumulate to the tune of ₹100 crore in 30 years. Nevertheless, achieving this goal requires some adjustments or fine-tuning in their

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fund SIP.

Speaking about the benefits of a long-term mutual fund SIP, Kartik Jhaveri, Wealth Manager at Transcend Capital, said, "Long-term mutual fund SIP enables an investor to get compounding benefits, i.e., interest on the interest earned on one's money. Wealth Manager Kartik Jhaveri recommends that investors increase their monthly SIP amount as their monthly income rises. This ensures that their investments grow in tandem with their income.

Jhaveri suggests that investors can use annual SIP step-up to increase their monthly SIP amount. In this strategy, an investor raises one's monthly SIP amount by around 15% annually. Through this approach, the investor can maintain a harmonious relationship between their earnings and savings, ensuring that their investment goals are met in a balanced manner.

However, if an investor wants to achieve an ambitious ₹100 crore retirement corpus in 30 years, they will have to adopt a more aggressive SIP step-up strategy. SEBI registered tax and investment expert Jitendra Solanki believes that a 20% annual SIP step-up is required to meet this

investment goal.

Solanki suggests that an investor can expect a return of around 15% on their mutual funds SIP over a period of 30 years. However, if the investor has a higher exposure in mid-cap and small-cap funds, the return may become 16 to 16.50% per annum. As the investment horizon is very long, Solanki suggests that mutual fund investors keep higher exposure in mid-cap and small-cap funds.

There are many online SIP calculators available that can help investors calculate the monthly SIP amount required to achieve their investment goal. Assuming a 16% annual return on a mutual fund SIP for 30 years, with a 20% annual SIP step-up, an investor would need to start a monthly SIP of around ₹20,500 to ₹21,000 to achieve a retirement corpus of ₹100 crore.

It's important to note that the views and recommendations mentioned in the previous article are those of individual analysts or wealth management companies, and not of Wsntimes. Investors are advised to check with certified experts before making any investment decisions.