Can a Rs 58,000 monthly SIP build a Rs 10 crore corpus in 16 years? Expert reviews portfolio

Building a sizeable retirement corpus requires more than investing regularly in mutual funds. Investors also need the right asset allocation, periodic portfolio reviews, adequate annual step-ups, and realistic return expectations to stay on track with their long-term financial goals. While a disciplined SIP is the foundation of wealth creation, even small changes in investment strategy can make a significant difference to the final corpus.

A 45-year old investor who is investing Rs 58,000 per month with a 10% annual step-up and has an investment horizon of 16 years reached out to ETMutualFunds and sought advice on his portfolio.

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His current investment includes Rs 15,000 in Parag Parikh Flexi Cap Fund, Rs 20,000 in Motilal Oswal Mid Cap Fund, Rs 15,000 in Bandhan Small Cap Fund, Rs 2,000 in Nippon India Multi Cap Fund and Rs 6,000 in ICICI Prudential NASDAQ 100 Index Fund.

The investor also holds lump-sum investments in gold and silver ETFs and contributes Rs 1,000 every month to PPF and Sukanya Samriddhi Yojana. His target is to accumulate a corpus of Rs 10 crore over the next 16 years through monthly SIPs.

The investor sought expert advice on four key questions which include is the portfolio and fund allocation appropriate, is it advisable to hold both a flexi cap and a multi cap fund, can the investor achieve the Rs 10 crore target in 16 years and are any changes required in the portfolio?

Expert Jasmeet Singh, Executive Director, Anand Rathi Wealth Limited analysed the portfolio and told ETMutualFunds that the investor's current investment strategy is unlikely to meet the desired corpus target.

Assuming a 13% annual return, a Rs 58,000 monthly SIP, a 10% annual step-up, and a 16-year investment horizon, the portfolio is expected to grow to around Rs 6.13 crore, resulting in a significant shortfall from the target of Rs 10 crore.

The expert recommends increasing the annual SIP step-up from 10% to 20% while maintaining the same monthly SIP amount. With a 20% yearly increase in SIPs and the same expected return of 13%, the projected corpus could rise to approximately Rs 12.14 crore, comfortably exceeding the investor's target.

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Flexi cap or multi cap : Which one to hold in portfolio

The expert believes the investor can continue holding both the Parag Parikh Flexi Cap Fund and the Nippon India Multi Cap Fund, as the two categories follow different investment mandates and complement each other within a diversified portfolio.

However, the market-cap allocation requires rebalancing. The ideal allocation suggested by the expert is 55% large-cap, 23% mid-cap and 22% small-cap.

Based on the current portfolio, the investor is under-allocated to large-cap stocks by 15%, while exposure to mid-cap funds is higher by 12% and small-cap funds by 3%.

Gold, silver and index funds

The expert advised against increasing exposure to gold and silver, noting that these assets tend to be cyclical and volatile. Investors with no long-term consumption goals linked to precious metals may consider gradually shifting those investments towards diversified equity funds.

The expert also recommended avoiding index funds and ETFs, arguing that actively managed equity funds have a better potential to generate alpha over the long term.

Funds to hold, exit and add

The expert suggested continuing investments in four funds which were Parag Parikh Flexi Cap Fund, Motilal Oswal Mid Cap Fund, Nippon India Multi Cap Fund and ICICI Prudential NASDAQ 100 Index Fund.

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The expert recommended exiting Bandhan Small Cap Fund and suggested replacements in four funds which includes SBI Large & Midcap Fund, ICICI Prudential Focused Equity Fund, Canara Robeco Multi Cap Fund and Invesco India Smallcap Fund

Singh also advised diversifying investments across different equity fund categories and AMCs to build a more balanced and resilient long-term portfolio. A disciplined review of the portfolio, along with higher annual SIP step-ups, could significantly improve the investor's chances of achieving the desired Rs 10 crore corpus over the next 16 years.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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