How to Build a 1 CR Portfolio Using Systematic Investment Route?
Mutual funds have become one of the most significant financial planning tools for corpus building and capital growth. With proper management and planning, you can achieve the 1 cr. Target your financial portfolio only through SIPs. If you are prudent enough to invest a fixed sum in SIPs for a fixed tenure, you won’t have to worry about corpus building, especially in the long run. In this article, we will discuss the important elements that you need to consider before investing in mutual funds and reaching your goal of reaching the 1 cr. A milestone in your financial portfolio. The easily available online SIP calculator will aid you in the process of budget planning and assessment.
How to Invest in a Mutual Fund Scheme?
Investing in any mutual fund scheme requires you to follow these few simple steps:
- Understanding your risk appetite and risk tolerance capability depending on your current financial status and the market conditions
- Second, comes asset allocation. Once you assess your risk profile, you must properly divide your investment among different asset classes. This must be balanced between equities and debt funds for better risk management.
- Next comes the identification of those mutual funds that invest in identical asset classes. It is best to go over several mutual fund schemes’ past performance trends and investment objectives to get a clearer picture.
- Once you decide upon the fund, make the necessary arrangements and apply for it either offline or online, depending on your convenience and preference. Under the contemporary context, the online application seems to be more plausible since it is fast, easy, and hassle-free.
- Ensure to keep our mutual fund investments as diversified as possible and keep a close watch ensuring to make the best out of it.
Selecting the Best Mutual Fund
Selecting the best mutual fund schemes depending on your suitability is a tricky challenge. However, you need to keep these facts in mind to achieve the desired:
The Objective of Investment:
The investment purpose is one of the crucial factors determining the type(s) of mutual fund schemes that you would like to choose for investment. The investment pattern for meeting a short-term financial goal must essentially differ from that of a long-term goal. Whatever the circumstances may be, creating a 1 CR portfolio planning requires considerably long-term planning.
If you desire to tread on a higher risk zone, provided you possess that financial stability depending on the current circumstances, it is best to go for equity-based mutual fund schemes, offering higher returns within a short span. This will aid you in the process of capital growth and reaching the target of 1 CR faster. However, with a comparatively lower risk appetite, debt mutual fund schemes are best suited.
After a practical assessment of your investment objective and risk appetite, choosing the type of mutual fund will become easier. Hybrid mutual fund schemes automatically come with a balance of debt and equity funds, offering moderate returns with a comparatively lower risk.
You must look out for the performance of the concerned fund over the last 3-5 years. Although it is dependent on the market conditions, yet, you can estimate potential returns in the eventual future.
Exit Load and Expense Ratio:
These fees are charged by the concerned fund house. It may cost you the accumulated returns. Therefore, it is best to ensure that the fund chosen possesses minimum or zero exit load and a low expense ratio.
The thumb rule for investment is to follow the 50/30/20 budgeting system. This implies dividing your monthly earnings into three broad categories: 50% on non-negotiable and essential expenses, 30% on discretionary expenses, and 20% on investments and savings.
An early start to investment will enhance the power of compounding, aiding in reaching your 1 CR target faster.
Understanding the Importance of SIPs
SIPs are like recurring deposits, where you must regularly invest a small but fixed amount in mutual fund schemes. You get the benefit of rupee cost averaging, and SIPs even reduce market volatility.
If you invest INR 5000 with an estimated return rate of 12%, it will take 26 years to hit the 1 CR mark. However, if the investment amount is INR 20000 at the same rate of interest, it won’t take over 15 years to reach the same milestone.
A step-up SIP allows you to increase the SIP investment by a fixed amount at fixed intervals, depending on your convenience. In case you invest INR 5000 in a SIP, you can choose to increase it by INR 1000/year. This will help you in faster capital growth than a regular SIP.
A SIP calculator is a handy online digital tool that reveals the estimated returns from a SIP investment. As you enter the relevant details, the SIP calculator works automatically to display the results, aiding human errors.
The above discussion reveals the important aspects related to investments in mutual funds. Depending on your current financial status, you can begin your investment portfolio and gradually enhance it as time progresses, ensuring optimum gains.