Mutual fund advisors always recommend investing based on your risk appetite, investment horizon, and financial goals. But before starting a SIP, ask yourself: Are you investing to build a retirement corpus, fund your child's education, buy a home, or finance your next vacation?
A SIP in an equity mutual fund is one of the most effective ways to achieve long-term financial goals. But an equally important question is: Are you investing enough to reach your target corpus? Have you calculated the monthly SIP required to achieve your financial goal?
Many mutual fund investors are not aware of the amount they need to invest to reach their desired goal or target corpus. If you want to confirm or know the amount you need to invest on a monthly basis to reach your desired corpus, you can use excel to calculate the investment amount.
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Step 1: Know your target amount or corpus
Just put down a number to your target corpus. Say your target corpus is Rs 1 crore. Make sure that your number is actually the amount you want as your target corpus.
Step 2: The time you have in hand to accumulate this target corpus
Just by thinking that you need to accumulate the target corpus of 1 crore in 10 years won't help. You need to give time to your investments to achieve your target amount. So it is really important to fix a time frame in which you want to achieve target corpus.
Step 3: Account for the inflation, adjust the goal amount accordingly
As you have decided your target amount and time frame in which you need to achieve the target corpus, the next step is to account for inflation. The prices of everything you need won’t remain the same throughout the time frame you have decided for achieving target corpus. Take a percentage say around 6% or 8% as the inflation rate.
Let us suppose your target corpus is Rs 1 crore needed to purchase a house and the time frame is 10 years. This is how you will calculate the future value.
Open an excel, click on fx to go to formula. Then select future value (fv) from the formula list.
