Consistent savings lead to a healthy sizeable retirement portfolio. For those who do not have the luxury of post-retirement government pension, investments are crucial to build a sizeable corpus. However, investments should be enough to account for inflation, which can easily erode the value of your hard-earned money. Wealth managers say annual returns of 9-10% over the long term to address the inflation problem. While starting early is best to build a sizeable post-retirement piggy bank, an average
While debt instruments are good for capital preservation once a corpus is built, they are not enough to accumulate a sizeable corpus. Investment managers prescribe SIPs in index mutual funds to investors for the duration of their working years in order to build sizeable
Increasing the SIPs annually in sync with one’s income growth also accelerates the whole process. Theoretically, it is possible to as much as Rs 14-15 crore. Monthly savings of Rs 15,000 in an equity mutual fund over a period of 25-30 years are enough to reach the goal. The 15x15x15 rule of
It is also needed that you increase your SIP amount in sync with your annual income growth. If one is consistent and start early, they can easily accumulate a corpus as large as Rs 20 crore. If an investor starts investing in Mutual Funds through SIPs from the age of 25 and continues investing till they are 60, then they will be able to invest for 35 years.
A monthly SIP of Rs 15,000 for a period of 15 years in a fund bearing 15% annualised returns will enable an individual to save Rs 14.5 crore by the end of the investment period with an annual step-up of 15% for the vesting period.
As per the step-up SIP calculator, a SIP of Rs 15,000 is required for a period of 25 years with an annual step-up of 15% and assuming 15% to generate Rs 14.5 crore. This essentially means that you are topping up your SIP by a certain percentage every year, for example, Rs 15,000 per month in 2021, Rs 17,250 in 2022 (15000+15%) and so on. The calculation is based on monthly SIP with selected top-up frequency viz, the half-yearly or yearly basis on the basis of 15% rate as selected. The returns are shown point to point in absolute terms.
(The above article is meant for educational purposes only and should not be construed as investment advice. Readers are advised to contact professional investment advisors to achieve their financial goals.)