Mutual funds have emerged as one of the prominent investment instruments in India. They allow you to invest your money in debt and equity and gain high returns over the long term. Another benefit of investing in mutual funds is that they are not as risky as equity shares since professional fund managers manage them.
However, it’s crucial to define your investment goals before investing in mutual funds. Knowing how much corpus you want to create in how many years will help you determine the approximate amount you need to invest to reach your investment target.
For example, suppose you want to make ₹ 50 lakhs in 15 years through mutual funds for your child’s marriage. Let’s look at how you can do so.
How to invest?
There are two ways to invest in mutual funds – lumpsum investment and systematic investment plan (SIP).
Lump sum investment refers to a one-time investment made in a specific mutual fund. This method allows you to make a bulk investment in a mutual fund and enables it to grow to achieve your target. The minimum amount you can invest as lumpsum varies across mutual funds, usually ranging between ₹ 1,000 to ₹ 10,000.
On the other hand, SIP is a method that enables an investor to make fixed investments in mutual funds at periodic intervals. It is similar to a recurring deposit bank account. The SIP method is more suitable for goal-based investing as it enables you to invest small amounts at regular intervals to accumulate the desirable corpus.
How much to invest?
To achieve your investment goal through a mutual fund, it’s imperative to know how much you need to invest. The answer to this question would depend upon several factors, including your mode of investment, target, time horizon, and the projected returns a fund can generate.
You can use an online mutual fund returns calculator to determine the amount you need to invest to achieve your investment goal. Assuming that you’re investing in a mutual fund that can generate 12% annualized returns over the long term, let’s calculate the amount you should invest to create a corpus of ₹ 50 lakhs in 15 years:
If you want to invest a lump sum in a mutual fund generating 12% annualized returns, you need to invest ₹ 9.15 lakhs to create a corpus of approximately ₹ 50 lakhs after 15 years.
If you want to invest through SIP, you can invest ₹ 10,000 every month in the same mutual fund to create a corpus of approximately ₹ 50 lakhs after 15 years.
Note that these values are calculated based on assumptions. If you want to ensure that you achieve your investment goal, you can increase your investment amount by 10 to 15 percent.
Where to invest?
There are 44 Asset Management Companies (AMCs) in India offering mutual funds for investments. You can invest in a fund of your choice to achieve your investment goal. While selecting a mutual fund, do consider various factors, such as its past performance, expense ratio, fund manager’s experience, risks, and liquidity.
You can download the Tata Capital Moneyfy App on your smartphone to get insights about various mutual funds in India and start investing in them in a hassle-free manner.