An amount of Rs 12 crore at retirement is a dream for many. The amount is big since even a 6% interest on such an amount would provide one with Rs 72 lakh a year. Can a middle-class person think of building such a corpus for his/her retirement? The answer: with a little planning and doggedness one can. The real point is to shun any impulsive decision along the way.
To plan a way to reach our cherished financial goal, let’s depend on two time-tested methods – the Employees’ Provident Fund and mutual funds. The former is a statutory right of employees if one is employed in a firm with more than 20 employees.
What EPF can give you
Let’s assume a person begins to work at 25 years. If one wants to build a big corpus, one has to invest from the beginning of one’s working life. This careful investor, let’s say, retires at 58.
Take EPF first. It will keep accumulating wealth for the employee throughout his working life.
Let’s say our candidate earns a Basic + DA amount of Rs 25,000 every month. If we assume even a 5% rise in salary for him every year, and the annual interest at 8.1%, he/she would have Rs 1.95 crore in his account at retirement.
Please note that we have assumed the rate of interest in EPF at 8.1% and not 8.25% which was the rate in FY24. Any higher rate of interest would fetch him a higher amount.
What mutual funds can fetch you
If he starts a Systematic Investment Plan or SIP in mutual funds every month, he/she can easily plan his journey towards amassing Rs 10 crore when he/she reaches 58. It means he/she has 33 years to make Rs 10 crore through SIP in mutual funds.
If he/she can be disciplined in approach the journey is not very difficult. Let’s see how.
To begin, he/she has to invest Rs 13,000 every month through the SIP route. He has to raise his investments by 5% every year. He/she can do that since income would rise with time.
We would assume a 12% return on investment which is not a difficult thing to achieve in the long run.
In this way, when he/she reaches 58, there would be nothing less than Rs 10.06 crore in his mutual funds.
One has to consult a qualified investment advisor for guidance in mutual fund investments since there are dozens of funds in each micro-category for one to choose from.
Both Employees’ Provident Fund and Mutual funds can work silently to build wealth for you. The only thing needed from you is intelligent planning and perseverance. Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
