Best SIPs to build a retirement corpus of Rs 3 crore

Sure, Rs 1 crore is a large sum today. But do you believe it will have the same value after 20 years? Do you know how inflation impacts the value of money over a long period? For example, the value of a house is Rs 1 crore today. Do you know how much you need to shell out to buy it after 20 years? Hold your breath: you need Rs 3.21 crore to buy the same house after 20 years, accounting for an annual inflation of 6 per cent. In other words, Rs 1 crore would be worth 1/3rd of its value (around Rs 31 lakh) today after 20 years.

Everyone knows about inflation, but many people fail to include it in their financial planning. Be it retirement or child's higher education, inflation would add a few zeros to your target corpus over a long period. Failing to account for it would be disastrous.

The best way to tame the villain is to work with actual numbers. Always find out the current cost of your financial goal. Once you have it, inflate it with a realistic inflation number for every year. This will help you to arrive at a realistic corpus. You can use the FV formula in Mircosoft Excel or compounding interest formula to do this calculation.

Once you know the target corpus, you need to identify an ideal investment vehicle to achieve the goal. Sure, since it is a long-term goal, you should naturally opt for equity mutual fund schemes. However, make sure you chose an equity mutual fund category that is in line with your risk profile. You may use the PMT formula in Microsoft Excel to find how to much you need to invest every month to create your target corpus.

You can check our special page ‘Retire rich with mutual funds’ to know everything about planning your retirement with mutual funds.