How much SIP in equity funds will make Rs 3 crore in 20 years?

• Follow

Mutual funds have the potential to offer returns higher than inflation. Systematic Investment Plan (SIP) is one way to invest in mutual funds.

There are different types of mutual funds. Some mutual funds invest in stocks, some in fixed income instruments like bonds, and there are also mutual funds that invest in gold. However, if you are looking for a long-term investment, SIP in equity mutual funds is a better option.

To start investing, the first thing you should have is a clear financial goal, in simple words, understanding what purpose you are saving money for. For example, if your financial goal is to accumulate funds for starting a business. There are several benefits associated with investing in SIP, such as compounding, goal-oriented investment, the facility to increase SIP and rupee cost averaging. Rupee cost Averaging is an investment technique where an individual invests a fixed amount at regular intervals without worrying about market fluctuations.

Now, let’s find out how much you should invest every month in equity mutual funds to accumulate Rs 3 crore in 20 years. Using the AMFI’s goal-based SIP calculator with an estimated return of 12%, you need to invest approximately Rs 30,325  per month. In 20 years, you will accumulate around Rs 72.78 lakh, and with the benefits of compounding, you will achieve the target of Rs 3 crore.

Returns in mutual funds are market-driven and not fixed, so there might be fluctuations in returns. Now, let’s see in which funds you can invest Rs 30,000 per month to accumulate Rs 3 crore.

According to Mohit Gang, Co-founder of MoneyFront, to fulfil his goal, you can invest Rs 6,325 per month in Parag Parikh Flexi Cap and Rs 6,000-6,000  per month in Tata Large and Mid Cap Fund, UTI Nifty 200 Momentum 30 Index Fund, Edelweiss Mid Cap Fund, and Tata Small Cap Fund. A monthly amount of Rs 30,000 is not small. In such a scenario, if you cannot afford an SIP of Rs 30,000, you can consider investing in SIPs of Rs 10,000 or Rs 15,000. By increasing the SIP amount by 5 to 10% annually, you  can reach your financial goals.

Accumulating a corpus of Rs 3 crore in 20 years is not easy, but with wise financial decisions, this goal can be achieved. Before investing, it’s essential to assess your risk tolerance and choose funds accordingly.

Equity mutual funds typically offer a return of around 12%. However, there may be some years when your portfolio incurs losses. Therefore, instead of relying solely on one asset class, it is advisable to create a diversified portfolio with different asset classes such as equity, debt, gold, or real estate. This ensures balance in the portfolio and minimizes the impact of market volatility on your investments.

The earlier you invest in your younger years, the larger the corpus you can accumulate. While doing SIP, it’s crucial not only to start but also to review your portfolio at least once a year. This ensures that any shortfall in achieving your financial goal can be addressed promptly.