Wouldn’t it be nice to have one crore in our bank account in the next twenty years? All the more so, without having to work for it? Caught your attention, didn’t it?! Well, we are here to tell you just how you can achieve your wish. Right now, it sounds like a near impossible achievement to reach a bank balance of such an exorbitant amount in just 20 years. However, with the magic of mutual funds, the task can be achieved in an easy and systematic manner, without any stress. With a mutual fund investmnet, you can gather an amount that may take many more years to reach, through traditional intruments of wealth management.
Below are some methods by which you can reach your target savings of Rs. 1 crore in twenty years, through mutual funds:
- A monthly systematic investment plan or an SIP – the simplest and most burden free form of investing in mutual funds. The freedom is all yours. You can choose how much you would like to invest, at a set frequency of your choice, with no restrictions on the same. You can choose to invest just Rs. 500 per cycle or even Rs. 1 lakh. You can invest fortnightly, monthly or quarterly. Such options make the process of financial planning a lot more convenient and less cumbersome. Here is a quick example: To reach a corpus amount of Rs. 1 crore in twenty years at an average expected CAGR of 15%, you can start by investing a little as Rs. 6596 per month!
- A lump sum investment – Another format that also works is for us to invest a large amount at one time. This works when we receive our annual bonuses and so on. Just as an SIP, not only does the large amount of money bring us large opportunities to make investmnets, the returns on the same can be reinvested to increase our earnings, further. Here is an example of the same: to reach your target corpus of Rs. 1 crore in twenty years, as a lump sum, your best investment option is to invest Rs. 54,768 now (expected average CAGR of 15%).
Not to consider: Investment in debt funds v equity funds
When we wonder how to invest in mutual funds, our solution is based on answering one core question – is our monetary need for the immediate future or more long-term? Based on this, you can optimise on where to invest by finding the right mix and match of equity funds and debt funds. Usually, when we require funds for an immediate purpose, we tend to invest in debt funds which lead to short-term gains, at an added risk, of course. However, for our goal of reaching a corpus of Rs. 1 crore in a larger time frame of twenty years, the best investment option is to invest in equity funds that provide long-terms gains at a reduced amount of risk, making it a more dependable and a stress-free investment. Also, such long-term investments come under the bracket of tax saving mutual funds.