Mutual funds can be a great investment tool to create a corpus of Rs. 1 crore. All you need to do is to determine the term of your investment and risk appetite to achieve this goal.
A mutual fund portfolio may be capable of creating a corpus of Rs. 1 crore, if the correct amount is invested for a definite period in a particular mutual fund scheme.
Investing in equity mutual fund scheme via SIP (Systematic Investment Plan) is the best way to achieve your long-term investment goals. This scheme has the potential to provide superior returns as compared to other asset classes over a period of time. You must choose a mutual fund scheme based on your risk profile.
Let us understand with an illustration of how you can create a corpus of Rs. 1 crore in different timeframes by investing in a Systematic Investment plan of best mutual funds.
How to get Rs. 1 crore in 20 years
If you can spare Rs. 9000 every month, you can start a mutual fund SIP immediately and invest in a mutual fund scheme via one of the best fund houses. If you need help in selecting mutual fund schemes, you can check our recommended top mutual fund portfolios (https://www.coverfox.com/personal-finance/mutual-funds/best-mutual-funds-to-invest/) and pick the one based on your risk appetite and investment capacity.
|Monthly Investment Amount||Rs. 22,000||Rs. 9000|
|Time Period||20 years||20 years|
|Total Amount Invested||Rs. 5,280,000||Rs. 21,60,000|
|Total Corpus||Rs. 10,024,207||Rs. 10,561,268|
|Net Gains||Rs. 47,44,207||Rs. 8,401,268|
How to get Rs. 1 crore in 15 years
|Monthly Investment Amount||Rs. 35000||Rs. 18000|
|Time Period||15 years||15 years|
|Total Amount Invested||Rs. 63,00,000||Rs. 63,00,000|
|Total Corpus||Rs. 10,090,797||Rs. 10,173,729|
|Net Gains||Rs. 3,790,797||Rs. 6,933,729|
How to get Rs. 1 crore in 10 years
|Monthly Investment Amount||Rs. 62,000||Rs. 40,500|
|Time Period||10 years||10 years|
|Total Amount Invested||Rs. 7,440,000||Rs. 4,860,000|
|Total Corpus||Rs. 10,122,386||Rs. 10,096,340|
|Net Gains||Rs. 2,682,386||Rs. 5,236,340|
The example given above was just to give you a picture of how your returns on investment are dependent on multiple variables. Hence, whether your mutual fund portfolio can create Rs. 1 crore for you or not, is a difficult question to answer without knowing what your investment portfolio comprises.
Follow these five simple steps to invest in mutual funds
Understand your risk capacity and risk tolerance.
The next step is asset allocation. Once you identify your risk profile, whether you are up for taking a high risk or want to invest in a less-risky asset class, you should look to divide your investment between various asset classes. Ideally, your asset allocation should have a mix of debt and equity to balance the risk.
The next step is to identify mutual funds that invest in the same asset class. You can compare different mutual fund portfolios based on their investment objectives and past performance.
Decide on the mutual fund scheme you will be investing your money in and make the application online or offline. It is wise to make an online application as it includes minimal steps and hassle-free process.
Make sure that you diversify your investments and keep a regular watch to ensure that you get the best out of your mutual fund investment.
How to select the best mutual fund?
The best mutual fund that you should opt for differs from other investors based on several factors. As an investor, you should thoroughly evaluate the suitability of the best mutual fund scheme to your unique requirements before investing your money in it. These factors are:
Investment objective: Your purpose behind the investment is one of the primary parameters that determine the type of mutual fund portfolio you should invest in. Are you looking for stable returns over the long run or a short-term gain? If you are investing money to meet immediate financial need, your ideal mutual fund investment will be different from those who are investing in for long-term objectives such as child’s education and marriage, wealth creation, retirement planning, etc.
Risk appetite: If you have a high-risk profile, you can consider investing in an equity-oriented mutual fund that is accompanied by high risk and high returns. However, if you have a low-risk appetite, you should focus more on debt mutual funds as they are less exposed to capital market risks and offers comparatively lower returns.
Type of fund: Once you are clear about your investment objective and risk appetite, it will be easier for you to decide on the type of mutual fund you want to invest in. While equity mutual fund comes with higher risk, debt mutual funds are exposed to lower risk, and therefore, generate lower yields as well. The balanced or hybrid mutual funds include both equity and debt in a balanced proportion offering minimum risk and medium returns. Additionally, not just the fund type, selection of the right fund house is equally important. A reputed asset management company assures that your mutual fund investment is in safe hands.
Fund performance: One of the critical factors that you should never neglect is the funds' performance over the past 3 to 5 years and the estimated future performance. Though the performance is vulnerable to market risks, the estimated predictions of portfolio performance will give you a fair idea of what to expect.
Expense Ratio and Exit Load: Expense ratio and Exit load are the fees charged by the fund house. Hence, they may eat into the returns generated on your investments. Therefore, it is advisable to look for a mutual fund scheme that has a low expense ratio and minimum or no exit load.
A mutual fund is an excellent investment tool to achieve a coveted corpus of Rs. 1 crore. However, reaching this amount would require you to continue investing money through short and mid-term volatility. Moreover, deciding the investment amount would require you to consider how much you earn, your current liabilities, if any. You also need to figure out the tenure for which you can stay invested. And Voila! You may just create a corpus of Rs. 1 Crore.
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