VR Logo

Accumulating A Corpus

You need to invest an adequate amount over the long-term to build your desired retirement corpus…

I am 38 and am investing Rs 2000 every month in DSPBR Micro Cap, DSPBR Top 100 Equity, HDFC Top 200, ICICI Prudential Discovery, Reliance Growth and Sundaram Select Midcap since September 2010. I am investing for the next 20 years to build a corpus of Rs 2 crore, will it be possible with these investments?
- Viswanathan

Fund Scheme  Category  Rating  3-year return (%)  5-year return (%)
DSPBR Top 100 Equity Large Cap ***** 17.55 18.86
HDFC Top 200 Large & Mid Cap ***** 22.76 20.16
ICICI Prudential Discovery Mid & Small Cap **** 28.06 14.81
DSPBR Micro Cap Mid & Small Cap **** 22.32 NA
Reliance Growth Mid & Small Cap *** 15.09 18.22
Sundaram Select Midcap Mid & Small Cap **** 21.66 16.12
Return as on July 8, 2011, Ranking as on June, 2011

If your current investment of Rs 12,000 earns an annualised 12 per cent, you will accumulate Rs 1.19 crore in twenty years. If the same investment earns at 15 per cent returns, the corpus will work to Rs 1.81 crore. Hence, you need to invest more than Rs 12,000 a month to achieve your retirement goal. An investment of Rs 20,100 for twenty years earning an annualised 12 per cent will build a corpus of Rs 2 crore or an investment of Rs 13,200 earning and annualised 15 per cent will achieve this goal.

Though, you have selected good funds to invest in, collectively it lacks diversity. A portfolio of six funds with four mid- and small-cap funds is diversity in number and not style. Moreover, too many mid- and small-cap funds will lead to a risky portfolio. You should build a portfolio based on the core and satellite approach. This approach will provide the necessary stability and growth for long-term wealth creation. Allocate 70-80 per cent of your investments to core funds and the remaining in satellite funds.

You can have 2-3 funds as core holdings comprising large-cap and large- and mid-cap funds, with the satellite component with mid- and small-cap funds and multi-cap funds to achieve long-term wealth appreciation. This way, the investments have the ability to absorb shocks as well as have the potential to earn higher returns over various market cycles. Invest regularly and track the performance of your investments at least once a year to assess its progress towards your financial goal.

Post Your Query