How can you make 1 Crore from Mutual funds?

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Before answering the question that how you can make 1 Crore from mutual funds, there are two things that you should know first-

  • Making 1 Crore from mutual funds in a particular period will highly be dependent on the amount you invest in your mutual fund portfolio. You should not have any unrealistic assumption and should know that higher the amount is invested, more quickly you will become a crorepati.
  • The type of mutual funds you invest-in to earn 1 Crore rupees plays an important role in deciding the time horizon and the total amount you need to invest. For example- Investing in debt fund has a lower risk but at the same time generates a lower return. Hence, earning 1 Crore from this fund will take quite a long time or otherwise, you'll have to invest a high amount.

SIP Plan to reach the target of 1 Crore from mutual funds within 10Y, 15Y & 20Y 

  • In the last 10 years, mutual funds have provided an average return of 15% p.a. with small-cap and mid-cap to be around 20% P.A. but the same returns are not guaranteed in future and therefore we are taking 12% p.a. of return to be on safe side, for our calculation.
  • We have assumed a tax rate of 10%, which is the current long term capital gains tax (LTCG) charged on mutual funds, which are held for more than 1 year. Also the amount of Rs 1 lakh is exempted from LTCG but we are ignoring this relatively small amount and taking the new target of 1.1 Cr. for convenience.
Monthly SIP of Rs. 47,344 for 10 years will lead you to your target of 1.1 Crore.

Investment Period = 10 Year | Monthly SIP = 47,344 

Monthly SIP of Rs. 21,800 for 15 years will lead you to your target of 1.1 Crore.

Investment Period = 15 Years | Monthly SIP = 21,800 

Monthly SIP of Rs. 11,009 for 20 years will lead you to your target of 1.1 Crore.

Investment Period = 20 Years | Monthly SIP = 11,009 

One thing to observe above is that we have taken a constant amount of investment throughout the time horizon. This is generally not a realistic scenario because in the long run, your income will increase, along with which, your investment amount should increase too.

Lump sum Plan to reach the target of 1 Crore from mutual funds within 10Y, 15Y & 20Y

http://zfunds.in/wp-content/uploads/2019/07/10.jpg
  • Time Horizon - 10 Years
  • Investment Amount - 35.5 Lakh 
  • Traget - 1.1 Crore
  • CAGR - 12% 
  • Profits - 74.5 Lakhs
http://zfunds.in/wp-content/uploads/2019/07/15.jpg
  • Time Horizon - 15 Years
  • Investment Amount - 20.1 Lakh 
  • Traget - 1.1 Crore
  • CAGR - 12% 
  • Profits - 89.9 Lakhs 
http://zfunds.in/wp-content/uploads/2019/07/20.jpg
  • Time Horizon - 20 Years 
  • Investment Amount - 11.4 Lakh 
  • Traget - 1.1 Crore
  • CAGR - 12% 
  • Profits - 98.6 Lakhs 

You'll get an idea about how much you should invest today as a lump sum to achieve the target of 1 Crore after-tax on different investment horizon.

Things to keep in mind

Review your portfolio at least twice a year. Also, compare your funds return with their respective benchmarks and if you observe that your fund is continuously underperforming the benchmark for let's say 5-6 quarters without any satisfactory reason, then you should consider the rebalancing of your fund or consulting your adviser. 

Caution

  • We have taken the CAGR of 12% in the previous calculations by being a conservative investor. But since no one can accurately predict the market and there could be certain situations such as poor economic conditions which can decrease your average return even below 12%.
  • The tax rates we have taken are 10% which is as per the current LTCG. This rate could change in future or some additional tax could be charge which will negatively impact your returns and your goals.
  • Remember that the value of money falls over time due to inflation. The 1 crore rupee is a big amount at present but it will mean less and less in the future i.e. it will lose its value with the passage of time. Hence you should try and invest as much as possible in order to achieve this target as early as possible
  • The funds you have chosen may actual underperform the market year after year and fail to even meet the conservative target of 12%. This is why fund selection is extremely important.

Comments (1)

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    Avinash gaurav28/09/2019

    Hi this is qa team comment