How much to invest monthly to create a corpus of Rs 2 crore in 10 years

Assuming 12% CAGR returns in equity and 6% in fixed income, you can amass around Rs 19 crore for retirement after 20 years, with the help of Rs 1.6 crore in equity MF and Rs 10 lakh (with Rs 75,000 monthly contribution) in the EPF. Considering your current expenses (removing EMI expense) and adjusting for 7% annual inflation, your retirement corpus should help you sustain on fixed income products, assuming a life expectancy of 80 years. Studying abroad is expensive and costs can range from $50,000 to $1,00,000 per annum, per head, which is around Rs 42-84 lakh in today’s value. This will vary for different countries and universities. Weddings can also be costly. The surplus of `1.58 crore (Ulips, property) may not be enough for foreign education and weddings costs for both children. Education and wedding inflation can be 10-12% per annum. It is also advisable to avoid Ulips as they are hybrid products. These will only give you partial benefit from the investment and insurance buckets. To maximise the benefits, it is important to keep your investment and insurance portfolios separate. This will help you generate optimum returns from your investments and get full benefit from insurance by securing yourself and your family. Since you are 41 years old and have a long time horizon, you should venture into well-diversified flexicap mutual funds, instead of going for pure large-cap funds. Many of these funds have 50-60%, or more, allocation to large caps. Having some exposure to mid caps and small caps is important to maximise your returns over the long term. However, if you are unable to stomach much volatility, then sticking to pure largecap funds makes sense.

I am 38 years old and my monthly income is Rs 1 lakh. I have equity mutual funds worth Rs 10 lakh (with a Rs 35,000 monthly SIP) and Rs 40 lakh in the Provident Fund. How much should I invest via SIPs in the next 10 years to create a Rs 2 crore equity corpus? I have an aggressive risk appetite.

Prableen Bajpai, Founder, FinFix Research and Analytics: As you have indicated a high risk appetite, let’s consider two return scenarios. If we assume 12% market returns on your investment, the lump sum of Rs 10 lakh and SIP of Rs 35,000 will help build a corpus of close to Rs 1.09 crore in 10 years. To reach your target of Rs 2 crore in 10 years, you’ll need to increase the monthly SIP by Rs 40,000, taking it to Rs 75,000. Alternatively, you could consider raising the SIP to Rs 50,000 per month and gradually increasing it by 10% each year. Even if we assume a higher return of 15%, the current investment will not suffice and you will fall short by Rs 68 lakh, instead of Rs 91 lakh in the first case. This is because the time for compounding to work is less and even higher returns cannot compensate for this. Even with higher returns, an incremental investment of Rs 25,000 per month (monthly SIP of Rs 60,000) will be required. However, if you continue to invest for 15 years, providing more time for compounding, you can amass around Rs 2.2 crore with your original investment. A step-up by 10% each year will boost the corpus to Rs 3.4 crore in 15 years. Reaching your target in 10 years is ambitious, and you will have to increase the current SIP and extend the investment horizon to achieve it.

I’m 18 and want to start investing. I need guidance on how to allocate Rs 2,000 across mutual funds and gold bonds for the long term. What is the right age to purchase health and term insurance to secure my finances?

If you are planning to invest for eight years or more, you can explore a combination of ELSS and index funds. Index funds simply mirror the returns of an index like Nifty or Sensex. ELSS is an actively managed fund that has a lock-in period of three years and is among the best instruments for long-term investment. To start with, you can consider the Nifty 50 fund or an ELSS tax-saver from a reputed fund house. Consider gold only as a hedge and do not park more than 5-10% of your investment in it. Before you start investing, keep 3-6 months’ expenses as an emergency fund to protect your long-term savings. If you have student loans or are an earning member of the family, consider getting term insurance and increase the amount over time as your responsibilities grow. As for health insurance, most family floater plans cover adult children till the age of 25. So, if your parents have a floater plan, chances are that you will not need one right away. However, read the terms and conditions carefully to understand the extent of coverage and age limit.

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