I want to invest ₹50,000 monthly in a mutual fund for my retirement. I aim to accumulate a corpus of ₹8 crores. I can invest for the next 19 years. Please suggest how I can prepare my portfolio and advise me accordingly on where I should invest.
Reply by Shivansh Dandona: Head – Investment Management, FinEdge
A rough calculation suggests that by investing ₹50,000 monthly through a SIP for 19 years, you could accumulate a corpus close to ₹5 crores* during this period. There is a shortfall of about ₹3 crores; however, there are ways to cover it to meet your retirement goal. A step-up of 8% on your SIP every year is recommended and would be sufficient to reach your targeted retirement corpus. Since the step-up would happen gradually every year, your monthly cash flows will also not be significantly affected.
Portfolio Strategy
Contrary to the widespread belief that the ability to take risks should be based on an individual’s behavior, investing success is more likely determined by the ability to take risks based on the investment horizon. Given that your goal is 19 years away, an aggressive equity portfolio would be most suitable to achieve it. To construct such a portfolio, it is important to have a diversified equity allocation which could be as follows:
Large Cap Funds – Allocation Percentage: 50%
Allocation to large-cap funds would primarily achieve stability and growth in the portfolio.
Mid Cap Funds – Allocation Percentage: 25%
These funds could have the potential for higher growth compared to large-cap funds.
Small Cap Funds – Allocation Percentage: 25%
These funds focus on smaller companies with high growth potential, though they carry more risk and could be very volatile.
Your investment journey is long, and regular monitoring of your mutual fund portfolio to stay updated with your goal achievement is critical. Adjust your portfolio based on significant changes in your financial goals or life stage. Importantly, seek help from an investment expert who can assist in constructing your portfolio and ensure you stay focused on your path to achieving your retirement goal.
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