How much should i invest every month in indian equity based mutual funds to generate 1 crore in 10 years?
Answer
Hey there! I'm glad you're thinking about investing to build wealth over the long term. Let's break this down in a simple way to help you understand how much you need to invest monthly in Indian equity-based mutual funds to reach a goal of 1 crore in 10 years.
First, achieving 1 crore in 10 years through mutual funds depends on a few factors like the expected rate of return and consistency of investing. Equity mutual funds, which invest in stocks, typically offer higher returns over the long term compared to other options like fixed deposits, but they come with market risks. Historically, good equity mutual funds in India have delivered average annual returns of around 12-15% over a 10-year period, though this is not guaranteed. For our calculation, let’s assume an average return of 12% per year, which is a reasonable expectation for equity funds.
To reach 1 crore in 10 years (120 months), you can use a Systematic Investment Plan (SIP), where you invest a fixed amount every month. Using the SIP formula, if you expect a 12% annual return (compounded monthly), you would need to invest approximately ₹50,000 per month. This calculation factors in the power of compounding, where your returns also earn returns over time. If the market performs better (say 15% returns), you might need around ₹44,000 per month. However, if returns are lower (say 10%), the required SIP amount could go up to ₹55,000 per month. You can use online SIP calculators to tweak these numbers based on your expectations and risk appetite. Also, remember to review your investments periodically and consult a financial advisor to choose the right funds.
In conclusion, start with a monthly investment of around ₹50,000 in equity mutual funds through SIPs, assuming a 12% return, to aim for 1 crore in 10 years. Stay consistent, as regular investing and staying invested for the full term are key to achieving this goal. Don't worry if the amount seems high; you can start small and increase your SIP amount over time as your income grows.
Fun Fact: Did you know that the concept of mutual funds in India started way back in 1963 with the formation of the Unit Trust of India (UTI)? It was the first step towards making investing accessible to the common man!