A 30-year-old aiming to build a Rs 10 crore retirement corpus by age 50 can achieve this goal with an early start, sizable monthly investments, and the discipline to increase contributions as income grows.
Under a 12% annual return scenario, an investor can begin with a monthly SIP of Rs 53,700, provided the contribution is increased by 10% every year for 20 years.
Without an annual step-up, the required monthly SIP rises to Rs 1,08,700.
The target becomes more demanding when inflation is factored in, with ZFunds estimating that the investor must either contribute a fixed Rs 1.98 lakh every month or start with Rs 85,000 and raise the SIP by 10% annually.
Nilesh D Naik, head of mutual funds at PhonePe, calculates that the required SIP varies substantially across return assumptions.
At an expected annualised return of 8%, an investor would need a fixed monthly SIP of Rs 1,74,600 to accumulate Rs 10 crore over 20 years.
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Alternatively, the investor could begin with Rs 77,300 a month and increase the SIP by 10% every year.
If the portfolio delivers a 10% annualised return, the required fixed SIP falls to Rs 1,38,100 a month.
With a 10% annual step-up, the starting SIP falls further to Rs 64,700 a month.
All amounts have been rounded to the nearest Rs 100.
For an aggressive investor with a 20-year horizon, ZFunds recommends allocating the entire portfolio to equity mutual funds.
It suggests investing 55% in flexi-cap or multi-cap funds, giving fund managers the flexibility to move between large, mid-sized and smaller companies as opportunities change.
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Another 35% can be allocated to mid-cap and small-cap funds, which carry greater volatility but provide exposure to smaller, faster-growing businesses over the long investment horizon.
Naik takes a more guarded approach, recommending that flexi-cap, large-and-midcap or value funds form the core equity allocation, with more aggressive categories such as small-cap funds used tactically when valuations are favourable.
As the investor progresses towards their goal, they may need to adjust their asset allocation to balance risk and potential returns, potentially leading to a more conservative approach as they near their target.
This could involve gradually shifting from equity to fixed income or other safer assets to protect their accumulated wealth.
Ultimately, the Rs 10 crore target is achievable under each of the scenarios, but only with different combinations of starting capital, annual increases, and assumed returns.
