Investing a small amount every year with a proper investment plan can help you save Rs 50 lakh in the next 5 years. It’s completely achievable but cannot be done without a disciplined approach to investing.
The most important step is to decide the form of investment. A mutual fund is the best form of investment that can help you save Rs. 50 lakh in 5 Years.
The key to wealth accumulation is consistency. Investing through a SIP (Systematic Investment Plan) helps to leverage rupee cost averaging, where more units are bought when the market falls, and fewer units are bought when the market rises.
Regular investing through the Systematic Investment Plan allows you to reinvest your gains, which leads to compounding. This approach also mitigates the need to time the market, thereby smoothing out the effects of market volatility over time.
Let's determine the monthly SIP amount based on expected annualized returns to achieve our target funds of ₹50 lakh in 5 years. While we need to remember that mutual fund returns are subject to market risk, we can get an idea based on historical data. Below is an illustrative breakdown of monthly investment:
|
Average Annual Return |
Monthly SIP Amount in Rupees |
|
8% |
67,610 |
|
10% |
64,040 |
|
12% |
60,650 |
It is advisable to plan for a lower return, considering the volatility of the market. Therefore, you should aim to invest approximately ₹67,610 per month to achieve the ₹50 lakh target within 5 years.
You also need to pay taxes if your long-term gains exceed Rs. 1.25 lakhs. The rate of Long-Term Capital Gains Tax on mutual funds is 12.5%, and there is no indexation benefit.
Given the timeframe of 5 years, a diversified mutual fund portfolio is the best option to help you save Rs. 50. Considering the short time horizon, you must first know how to invest in mutual funds and then select funds that balance the growth potential along with risk management. A healthy diversified portfolio can consist of the below categories of mutual funds.
Large Cap Funds Companies have a strong financial position, consistent cash flow, and reliable revenue streams. They are high on liquidity and more resilient during economic downturns. Funds investing 85% into such companies can lead to desired growth within the limited time frame.
Flexicap Funds provide a balance of stability and growth due to their exposure to:
Hybrid Funds such as Balanced Advantage Funds (BAF) and Aggressive Hybrid Funds allocate 30% to 80% of assets to equity and the remaining to debt instruments. The percentage keeps on varying depending on market volatility.
Other than offering tax benefits, ELSS funds also provide high growth due to their 80% exposure to equity. The lock-in period ensures that investors stay invested during the market cycle, thereby compounding their returns.
Saving ₹50 lakh in 5 years is achievable, provided you have a strategic approach. Selecting appropriate investment forms and adopting a disciplined approach will help you do it with ease. Once you have the right investment plan in place, you must find the best mutual funds to invest in 2025.
To avail lucrative returns on your investments,
Almondz
Learn To Earn
Learn from our knowledge center curated by our experts, which will help you take informed decisions about your investments.
Knowledge Center
