Welcome to the ‘Exclusive Club’
Speaking in terms of India, if you are a ‘Crorepati’ then you are a part and a member of a ‘lavish club’ with a lavish lifestyle. Therefore, owing to its lavish lifestyles every person desire to be a part of this club. However, the question is, is it possible for everyone and if possible, what are the steps and processes for the same. For the people who are certainly not born with a silver spoon it is extremely difficult for them to be a part unless they got a Jackpot. Becoming a crorepati with a planned manner is a difficult task. In creation of such enormous wealth thanks to Mutual Funds option. Let’s discuss how Mutual funds aids in such a matter.
The need is to have a well-developed financial strategy for the Mutual fund investors so as to get into the exclusive club. An important factor for financial planning which should be taken into account is the aspect of inflation, which is fundamentally seen as a slow poison which eventually permeates the purchasing capabilities over a span of time. Therefore, while calculating the required sum of money in future it is essential to take into account inflation factor. The pertinent question is how to achieve this figure? One of the most prominent way to achieve this is through the adoption of right investment strategy.
Perks of Investing in Mutual Funds
It is an undeniable fact that the Mutual funds are one of the most efficient as well as effective ways of investing. The advantages attached to investing in mutual funds essentially lies in the fact that one can find a range of mutual funds that help to facilitate different needs including wealth creation. It is not just like a creation of portfolio but it would also help you in fulfilling desired financial goals.
The step of mutual fund SIP may make your journey easy. The back of the step-up calculation provides that the one can magnify one’s maturity amount to almost double by enhancing one’s SIP amount by 10% p.a. They stated that an earning individual can increase one’s investment by 10% as this much hike in earning can be anticipated when he or she commences SIP.
In an equity mutual fund, one can expect at least 12% returns in the long term. However, if you chose a fund from essentially a mid-cap or small-cap category and the time period for investment is beyond 15 years, then the return would be anticipated to the tune of 15% on an average.
Henceforth, if an investor decides to invest in a mid-cap or a small-cap fund while doing SIP, then presuming the 15% returns that one can expect on his or her return , the maturity amount without annual step up would be around 60 lakh Rupees provided the investment is done for a period of 20 years and corresponding SIP amount is Rs. 4500. However, considering the 10% annual step-up the maturity amount after the same period would be 1.12 Cr. Therefore, a 10% annual step up in the next 18 years would help the investor magnify his or her maturity amount by Rs. 52 lakhs while one’s investment in this period would go up by Rs. 20 lakhs.
In the case of SIP and step-up SIP, one derives the benefit of risk management. This essentially points out to the fact that the investment volatility would be fairly low in comparison with lump-sum investment. This is because of the add-on advantage of rupee cost averaging of SIP. Having said so, it is certainly difficult for the average salaried individual to invest such an enormous amount, however, SIP or Step-up SIP can do the trick for them.
Source- Indian Economy and Market.