NEW DELHI : I am about 30 and live in Bengaluru. My current salary is nearly ₹80,000 per month. I make the following payments every month.
Home loan– ₹25,000
LIC– ₹3,000
NPS– ₹5,000
I want to invest in mutual funds for the long term through a systematic investment plan. I have seen many references to equity, debt and index mutual funds. Which of these mutual funds types would be most beneficial for the long term? Would an investment of ₹10,000 to ₹15,000 a month be sufficient for a good return in the long run (20 years)?
–Name withheld on request
Answer by Harshad Chetanwala, founder, Mywealthgrowth.com
Your decision to start investing in mutual funds for the long term is correct and it can help you build a good corpus over a period. Though you would have read a lot about mutual funds, the right approach to investing in mutual funds is to link it to your objectives rather than doing random investments. As you have mentioned you are looking for investment from a long-term perspective you can associate this investment with wealth creation or retirement or any other long-term objective.
If you invest ₹10,000 every month for 20 years you will be able to create a corpus of about ₹91 lakh at 12% per annum rate of return. For the monthly investment of ₹15,000 the corpus would be about ₹1.36 crore. You may like to look if this corpus is sufficient for your goal. If the projected amount is lower than your objective then you will have to invest more every month. Another way to work on your investment plan is to define the goal amount and then work on the monthly investment required for that goal.
You can consider investing in equity mutual funds for your long term goal as debt mutual funds are useful for short- and mid-term goals. Following are some of the funds that you can invest in.
UTI or HDFC Nifty Index Fund–20% of SIP
Canara Robeco Bluechip Fund–15% of SIP
Parag Parikh Flexicap Fund–20% of SIP
UTI Flexicap Fund–15% of SIP
Mirae Asset Emerging Bluechip Fund–15% of SIP
Kotak Emerging Equities Fund–15% of SIP
You can also follow a strategy of increasing the SIP amount by 5-10% every year, this will help you to accumulate a higher corpus over a period.
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