Mutual funds offer diversification or access to a wider variety of investments. In a conversation with CNBC-TV18, Nirav R Karkera, the Head of Research at Fisdom, shared a clear roadmap for achieving substantial financial milestones of Rs 5 crore within a decade, as well as Rs 10 crore over a 20-year period.

Addressing the pursuit of accumulating Rs 5 crore within a span of 10 years, along with Rs 10 crore in 20 years, Karkera shares his expertise. "I will maintain the assumption of returns ranging between 15 to 18 percent," he comments.

Drawing from these assumptions, it becomes evident that if someone's assets grow annually at a rate of 18 percent, a lump sum investment of approximately Rs 1 crore would be a crucial starting point.

On the flip side, Karkera offers an alternative perspective. With a more conservative growth estimate of 15 percent, an advisable lump sum investment would hover around Rs 1.25 crore. This indicates an investment range of Rs 1 crore to Rs 1.25 crore to work towards the financial objectives.

Taking things a step further, Karkera introduces the concept of a Systematic Investment Plan (SIP) to achieve the same financial goals. For this approach, he recommends a SIP falling within the bracket of Rs 1.5 to 2 lakh. This range should set investors on the path to achieving their desired financial outcomes.

As investors adjust their expectations for returns, the required SIP contribution can decrease. However, adhering to the higher end of the spectrum is a wise move for a margin of safety. With this in mind, Karkera advises setting a monthly SIP goal of Rs 2 lakh. This aligns investors' strategy with the projected performance expectations and gives them a solid foundation for the financial aspirations.

To understand, constructing a robust mutual fund portfolio requires careful consideration of various factors. Whether investors opt for a lump sum investment or a SIP approach, the key lies in aligning the strategy with their financial objectives while factoring in a margin of safety.

For full interview, watch accompanying video

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First Published:Aug 24, 2023 5:45 PM IST