How much do I need to invest to accumulate Rs 20 lakh in 15 years?
I am 32 years old and want to accumulate Rs 20 lakh over 15 years and Rs 25 lakh over 20 years. How much do I need to invest per month to achieve these two goals? Please suggest schemes to invest in.
Rahul Parikh, CEO, Bajaj Capital replies: Since you are young and want to invest for longer time periods, you should invest in equities. They tend to deliver higher returns compared to other asset classes over longer time periods. Assuming that equities deliver a return of around 12% per annum over the next 15-20 years, you will need to start an SIP of Rs 5,000 per month to accumulate Rs 20 lakh over 15 years. To build a corpus of Rs 25 lakh over 20 years, you will have to start another SIP of Rs 3,000 per month. You may start these SIPs in multi-cap equity funds. The Rs 5,000 investment can be spread equally between any two of the following funds: Franklin India Equity, Kotak Standard Multi Cap, SBI Magnum Multi Cap and Mirae Asset India Equity. For your second goal, you can start the Rs 3,000 SIP in any one of the following schemes: Motilal Oswal Multicap 35, ICICI Prudential Value Discovery and UTI Value Opportunities.
I invested my retirement benefits in Aditya Birla SL Small Cap and ICICI Pru Equity and Debt in June last year and in HDFC Midcap Opportunity last month. All these funds have massively underperformed, eroding even my principal investment. Should I switch to other schemes? Please suggest options.
C.R. Chandrasekar, CEO and Co-Founder, FundsIndia.com replies: Two of the three schemes you have invested in are mid- and small-cap funds. These segments have been hit by volatility over the past six months, generating negative returns. These funds need a five-year time frame to be able to deliver. Consider holding them till they recover. As you are a retiree, it is advisable that you have more exposure to debt to insulate yourself from the volatility in equity funds. Consider gradually shifting about 50% of your investments to HDFC Short Term Debt and Aditya Birla Sun Life Floating Rate from the mid and small-cap schemes of the respective fund houses.
Rahul Parikh, CEO, Bajaj Capital replies: Since you are young and want to invest for longer time periods, you should invest in equities. They tend to deliver higher returns compared to other asset classes over longer time periods. Assuming that equities deliver a return of around 12% per annum over the next 15-20 years, you will need to start an SIP of Rs 5,000 per month to accumulate Rs 20 lakh over 15 years. To build a corpus of Rs 25 lakh over 20 years, you will have to start another SIP of Rs 3,000 per month. You may start these SIPs in multi-cap equity funds. The Rs 5,000 investment can be spread equally between any two of the following funds: Franklin India Equity, Kotak Standard Multi Cap, SBI Magnum Multi Cap and Mirae Asset India Equity. For your second goal, you can start the Rs 3,000 SIP in any one of the following schemes: Motilal Oswal Multicap 35, ICICI Prudential Value Discovery and UTI Value Opportunities.
I invested my retirement benefits in Aditya Birla SL Small Cap and ICICI Pru Equity and Debt in June last year and in HDFC Midcap Opportunity last month. All these funds have massively underperformed, eroding even my principal investment. Should I switch to other schemes? Please suggest options.
C.R. Chandrasekar, CEO and Co-Founder, FundsIndia.com replies: Two of the three schemes you have invested in are mid- and small-cap funds. These segments have been hit by volatility over the past six months, generating negative returns. These funds need a five-year time frame to be able to deliver. Consider holding them till they recover. As you are a retiree, it is advisable that you have more exposure to debt to insulate yourself from the volatility in equity funds. Consider gradually shifting about 50% of your investments to HDFC Short Term Debt and Aditya Birla Sun Life Floating Rate from the mid and small-cap schemes of the respective fund houses.
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