Can a Rs 50,000 monthly SIP build a Rs 10 crore corpus in 23 years? Expert suggests portfolio changes

Building a large mutual fund corpus requires more than simply investing regularly. Fund selection, asset allocation, diversification and annual SIP increases can play an important role when an investor has a long-term financial goal. For investors targeting a Rs 8-10 crore corpus over two decades or more, reviewing whether the portfolio has the right mix of large-, mid- and small-cap funds can be particularly important.

A 37-year-old investor with an annual income of Rs 14 lakh reached out to ETMutualFunds and said that he is investing Rs 50,000 every month through mutual fund SIPs and has set a target of building a corpus of Rs 8-10 crore over the next 23 years.

The investor currently has Rs 4.5 lakh invested in mutual funds, apart from a Rs 3.5 lakh emergency fund, and is targeting an emergency corpus of Rs 5 lakh. The investor has opted for the new tax regime and plans to increase the SIP amount by 10% every year.


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The investor’s current mutual fund portfolio comprises Aditya Birla Sun Life Liquid Fund, Bandhan Small Cap Fund, HDFC Mid Cap Fund, ICICI Prudential Focused Equity Fund, ICICI Prudential Large and Mid Cap Fund, Nippon India Small Cap Fund and Parag Parikh Flexi Cap Fund.

Chirag Muni, Executive Director at Anand Rathi Wealth Limited, analysed the portfolio and told ETMutualFunds that the 37-year-old investor contributes Rs 50,000 every month through SIPs, with an annual step-up of 10%. The investor has a current portfolio value of Rs 4.5 lakh, an investment horizon of 23 years and a target corpus of Rs 10 crore.

Muni noted that the investor’s emergency fund of Rs 3.5 lakh, against a target of Rs 5 lakh, provides a financial cushion. He advised keeping the emergency fund separate from the long-term investment portfolio. If the Aditya Birla Sun Life Liquid Fund is being used to build the emergency corpus, the investor can continue investing in it.

The expert’s calculations suggest that the investor could significantly exceed the target corpus with the current investment strategy. Assuming an expected annual return of 13%, a monthly SIP of Rs 50,000, an annual step-up of 10% and an investment horizon of 23 years, the projected corpus stands at Rs 17.15 crore.

With a higher annual step-up of 15%, the projected corpus could rise to Rs 27.25 crore. Muni suggested considering a 15% annual step-up to build a larger corpus.

However, the portfolio’s asset allocation needs attention. Muni recommended an ideal market-cap allocation of 55% to large-caps, 23% to mid-caps and 22% to small-caps. The investor is currently under-allocated to large-caps by 24 percentage points, while being over-allocated to mid-caps by 1 percentage point and small-caps by 13 percentage points.

The portfolio also has concentration concerns. Muni suggested capping the allocation to each fund at 10% to avoid overexposure. The investor also has an allocation of as much as 21% to ICICI Prudential Mutual Fund, which may warrant a review to improve diversification.

Among the existing funds, Muni recommended continuing with Aditya Birla Sun Life Liquid Fund, HDFC Mid Cap Fund, ICICI Prudential Focused Equity Fund, Bandhan Small Cap Fund and Parag Parikh Flexi Cap Fund.

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Aditya Birla Sun Life Liquid Fund delivered returns of 6.41% over one year, 6.88% annualised over three years and 6.25% annualised over five years. HDFC Mid Cap Fund delivered 10.95% over one year, while its three-year and five-year annualised returns stood at 18.06% and 19.39%, respectively.

ICICI Prudential Focused Equity Fund delivered 3.53% over one year, while its three-year and five-year annualised returns stood at 16.61% and 14.85%, respectively. Bandhan Small Cap Fund delivered 13.25% over one year, 23.71% annualised over three years and 18.66% annualised over five years.

Parag Parikh Flexi Cap Fund delivered a negative return of 1.42% over one year, while its three-year and five-year annualised returns stood at 12.89% and 11.50%, respectively.

Muni suggested exiting Nippon India Small Cap Fund and ICICI Prudential Large & Mid Cap Fund. Nippon India Small Cap Fund delivered 11.14% over one year, 14.92% annualised over three years and 19.01% annualised over five years. ICICI Prudential Large & Mid Cap Fund delivered 5.57% over one year, while its three-year and five-year annualised returns stood at 15.99% and 16.34%, respectively.

For fresh investments, Muni recommended SBI Large & Midcap Fund and Kotak Multi Cap Fund. SBI Large & Midcap Fund delivered 4.91% over one year and 12.58% annualised over three years, while its five-year annualised return stood at 13.29%. Kotak Multi Cap Fund delivered 6.70% over one year and 16.17% annualised over three years.

(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own and do not represent the views of The Economic Times)

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