Mutual funds represent a favoured investment option for numerous investors, offering several benefits. These include balanced portfolio management, diversification that mitigates risk, and the opportunity for dividend reinvestment.
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The selection of mutual funds is guided by a comprehensive set of criteria tailored to align with individual financial goals and comfort levels. Key factors influencing this decision include expected returns, risk tolerance, and the duration of investment.
Additionally, it is important to evaluate several critical aspects such as the fund’s expense ratio, historical performance, the experience level of the fund manager, and the total assets under management. These parameters ensure that investors can make informed choices that best suit their investment objectives.
In the dynamic environment of the stock market, recent observations indicate a significant decline in Indian benchmark indices, leading to increased investor apprehension regarding the robustness of their equity portfolios. The Nifty 50 has experienced a decrease of 1.87%, while the S&P BSE Sensex has fallen by 1.64% in just one week, prompting numerous mutual fund investors to contemplate whether adjustments to their investment strategies might be necessary.
In such a situation, how do you attain your crorepati goals to attain the Rs 1 crore-mark in savings.
An investment strategy, also known as an investment approach, is a method employed by fund houses to guide their investment decisions. It is crucial that the investment strategy of a fund house aligns with your personal investment philosophy; discrepancies between the two can lead to conflicts of interest. Such misalignments may eventually compel investors to divest at less than optimal prices.
Business Today spoke to Shrinivas Khanolkar, Head – Products, Marketing & Corporate Communication, Mirae Asset Investment Managers, on the best strategy to accumulate Rs 1 crore by investing in mutual funds.
Here are the top points:
1. Principal Amount: Speaking about investment, Khanolkar said: Per month contribution is crucial. Say you start investing 10,000 per month and get an annual return of 13%, you need to keep contributing 19 years to see your goal being achieved. But, if you double your investment (Rs 20,000 per month) then you will achieve the same in approx. 14 years and few months.”
2. Inflation and other deterrents: Inflation also impacts equity funds. High inflation brings down the real rate of returns. The real rate of returns is the returns you earn up and above inflation.
Khanolkar said: “One needs to factor inflation and choose to do SIP top-up – if you top up your SIP by say 10% end of each year (first year 10,000; second year 11,000; third year 12,100 and so on) then you will achieve the goal in 15 years.”
3. Compounding for long-term approach: “Compounding generally kicks in after 12 years, this compounding effect contributes to growing wealth, while SIP supports long term wealth accumulation,” said Khanolkar.
4. Disciplined SIPs: Khanolkar said systematic investment plans can help you achieve discipline in investing.
The recent AMFI data showed that in April the mutual fund SIP contribution touched an all-time high level of Rs 20,371.47 crore witnessing a 6% surge from Rs 19,270.96 crore in March and Rs 13,728 crore in the same time last year. The number of new SIPs added in April was 63,64,907. The mutual fund SIP AUM in April stood at Rs 11,26,128.67 crore, compared to Rs 10,71,665.63 crore in March.
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The monthly SIP contribution has doubled from Rs 10,000 crore in September 2022 to Rs 20,000 crore in about one-and-a-half years. As of April 2024, the count of mutual fund SIP accounts reached a record high at 8.70 crore, showing an increase from 8.39 crore in March 2024. Additionally, mutual fund folios also achieved a historical peak with a total of 18.14 crore accounts recorded in April.
