My net monthly salary is Rs. 28,000. I plan to invest Rs. 8,000 every month through SIPs (Rs. 5,000 in ELSS and Rs. 1,000 each in three equity funds). My target is to build a corpus of Rs. 1 crore after 20 years. Please suggest in regards to the ELSS fund and three equity funds that I should invest in to achieve my goal.
-Ved Prakash Mishra
Congratulations. You are right on track! Assuming that a well rated equity fund would generate 20 per cent annual return in the coming years, your monthly investment of Rs 8,000 would grow to Rs 1.98 Crore in 20 years. However, fund selection would be the key here. Choose a fund which has proven its worth and has a good performance history.
For tax saving funds, choose from well rated funds like Magnum Tax Gain, Birla Sun Life Tax Relief or Sundaram Tax Saver. Amongst diversified equity funds select some large cap oriented funds like Reliance Vision, Sundaram Select Focus or Birla Frontline Equity. Avoid investing in too many funds. You can choose two ELSS funds (Rs 2,500 each) and two equity diversified funds (Rs 1,500 each) to divide your total investment of Rs 8000 per month.
This article was originally published on April 11, 2008.
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