- by Stocktry Expert
- 12th Apr 2021
Investment Planning to Accumulate Rs. 12 Lakh Through Mutual Fund SIPs in 5 Years
Five-year SIP returns on most large-cap index funds stand at 14-16 percent. The best of flexi-cap funds sport a return of 15-20 percent over the last five years. Although the return is not assured.
Assuming a conservative 10 percent return in your case for the next 5 years, a SIP of Rs. 10000 a month for next 5 years will deliver only Rs.7.74 lakh. If you need Rs. 12 lakh, you will have to set up the SIP amount to Rs. 15,500 at the same 10 percent return. Of course, the return might differ in real time. However, a stretch in investment by a few years or additional sources of saving included will be more comforting.
Considering the risk, if you wish to play safe, it is advisable to opt for recurring deposit for a fixed saving every month. However the right way to avail maximum deposit is by choosing a 6 months or 1 year RD and later changing the sum into a small-term FD to save yourself from low interest rates of RD.
As per the new PF rules, interest on cumulative annual employee contributions above Rs. 2.5 lakh shall attract income tax at the applicable tax slab.
Since the EPFO invests in the stock market through Nifty ETFs the investors are advised to put Rs. 2.5 lakhs in PF.
Although if you have enough exposure to equities as per your 5 year investment plan you can redeploy from VPF to the PPF. The PPF offers tax free interest and is also as safe as VPF. You can consider passive funds based on the bellwether indices if you do not already have enough exposure to equity as per your asset allocation plan.
You can go for index funds rather than ETFs. With index funds, you can do SIPs and don't require a demat account.
You also need not to worry about other issues such as tracking error and liquidity associated with ETFs.
HDFC index sensed and UTI NIFTY index are decent choices.