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# GROW my MONEY

Article | Sip - Jan 01, 1970 | 05:30 AM

For most Indians, retiring at 40 remains a fantasy. It would entail being born into a wealthy family, or graduating from the top business schools, or winning a lottery or being a smart investor. Since the first three options are not always in your control, let's look at the fourth- being a smart investor.

By investing right, one can ensure that money grows, and there is a steady source of income for the future. Building a corpus is an important goal that can only be reached through savings and investments.

But then how much is enough?

Everyone has a different lifestyle, and the expenses would be different. While the calculation may differ for each, the investment opportunities apply to all.

For example, let's assume you are Deepak Joshi, a software engineer working at a reputed company. At the young age of 25, Deepak realised that he could save a lot of money if he spends and invests the right amount.

He currently draws a salary of 6 lakhs per annum and being the hard worker that he gets an annual hike of 15%. He is single and resides in Pune. His monthly expenses right now are INR 25,000. Since Deepak is looking at medium to long-term investment, equity-based mutual fund scheme would be a good pick for him which can offer a 15% rate of return. He can aim to invest at least two lakhs annually which can be reinvested back. Assuming his salary gets hiked by 12%, he can maintain the same standard of living and invest higher amounts in the coming years.

The table below depicts how an initial amount of Rs. 2,00,000 can give an impressive growth after five years of investment.

 Years Investment amount annually (Rs.) (Assuming Deepak increases the annual amount by 15%) Reinvestment amount (Rs.)= Final Amount +Investment amount Final Amount (Rs.) 1 200000 230000 2 230000 460000 529000 3 264500 793500 912525 4 304175 1216700 1399205 5 349801.3 1749006 2011357.188

At the age of 30, Deepak decides to settle down and get married. Two years later, he also has a child. His expenses have risen, with the new addition to the family, but his wife is also employed and contributes to the household expenses. Deepak now increases his annual investment by only 10% instead of the previous 15%.

 Years Investment amount annually (Rs.) (Assuming Deepak increases the annual amount by 10%) Reinvestment amount (Rs.)= Final Amount +Investment amount Final Amount (Rs.) 6 384781.4 2396139 2755559.347 7 423259.5 3178819 3655641.688 8 465585.5 4121227 4739411.225 9 512144 5251555 6039288.52 10 563358.4 6602647 7593043.971 11 619694.3 8212738 9444648.957 12 681663.7 10126313 11645259.53 13 749830 12395090 14254353.01 14 824813 15079166 17341040.97 15 907294.4 18248335 20985585.62

At the age of 40, the corpus amount Deepak will receive is around Rs. 2.09 crores. He also has an Employee Provident Fund account which was started at the time he began employment. Even if one does a rough back-of-the- envelope calculation, at an interest rate of 8%, the lump sum amount would be in the range of 20-30 lakhs.

While this sum in itself will not sustain him for the next 25 years, he may quit his corporate job and sit back and invest a significant part of this amount back into mutual funds preferably a debt fund for added stability. He is also free to pursue his passion or maybe be a consultant, be his own boss.

Retirement to be fair is more of liberation from the rat race than anything else. If one plans one life smartly, by 40 you can reach a stage where you would not be bogged down by EMIs, but have dividends coming into your accounts. To achieve this, there are a plethora of investment options that are available from Birla Sun Life Mutual Fund that lets you do the same.

Disclaimer:
SIP does not assure a profit or guarantee protection against loss in a declining market. The illustration mentioned above is for illustrative purpose only and is not based on any judgments of the future return of the debt and equity markets/sectors or of any individual security and should not be construed as promise on minimum returns and/or safeguard of capital. Information gathered and material used in the above illustration is believed to be from reliable sources.
BSLAMC however does not warrant the accuracy, reasonableness and/or completeness of any such information. The illustration do not purport to represent the performance of any security or investments. Nothing contained herein shall amount to an offer, invitation, advertisement, promotion or sponsor of any product or services. In view of individual nature of consequences, each investor is advised to consult his/ her own Financial  advisor before taking any investment decision.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Are mutual funds a reasonable investment in bull market?

• Yes
• No

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### TRivia

• Indian Mutual Funds

Indian Mutual Funds have currentlyinvested about 1.35 crore (13.5 million) SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. (March 2017. Source: AMFI)

• AAUM

Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the month of March 2017 stood at ₹19.26 lakh crore. (Apr 2017. Source: AMFI)

• Equity-oriented Schemes

Equity-oriented schemes account for around 32.8% of the industry's assets. (March 2017. Source: AMFI) Equity-oriented schemes derive 85% of their assets from individual investors. (March 2017. Source: AMFI)

• HNI Investors

HNI investors account for 20.98% of investments for a period of 12-24 months. (Source: AMFI)

• Benefit of Index Funds

Index funds usually have much lower operating expenses over actively managed funds.

• What is Net Assets?

This figure represents the fund's total asset base, net of fees and expenses.