Building a sizeable corpus of Rs. 5 crore may seem like a lifetime goal. However, if you invest wisely, you can do that in as little as 15 years. Whether you are at the start of your career and want to create this wealth to buy a house in your 30s or if you are someone in your 40s and want to save this amount for your retirement, you can do so by investing in mutual funds.

How to build a corpus of Rs. 5 crore in 15 years

  • Invest in equity mutual funds

With an investment horizon of 15 years, you can invest in equity mutual funds. Equity mutual funds offer returns that are market-linked and hence have the potential to earn the highest returns amongst most asset classes. While the stock market can be volatile, mutual funds hedge that risk in two ways. First, mutual funds offer diversification since they hold multiple securities, so the risk is spread out. Second, a long investment horizon allows your investment to absorb short-term market fluctuations and leave your portfolio unimpacted.

Equity mutual funds also offer returns that are inflation beating. So, while your money uninvested would reduce in value over time as the general level of prices in the economy rises, when invested in mutual funds, you can earn returns that are higher than the rate of inflation.

  • Go for an SIP investment

A Systematic Investment Plan (SIP) in mutual funds allows you to slowly build your corpus with small amounts over time. You can use an SIP calculator to see what your monthly investment amount should be to reach your goal. For building a corpus of Rs. 5 crore in 15 years, your monthly SIP investment would need to be Rs. 75,000 at an estimated rate of 15%.

If that amount seems very high to begin with at this point, you can opt for the step-up SIP option. Here, you begin with a lower monthly amount and every year it increases by a certain predetermined percentage or amount. For instance, if you opt for a 15% step-up in your SIP in this example, your initial SIP amount would be Rs. 37,000 instead of Rs. 75,000. This is a helpful tool as it allows you to gradually increase your SIP mutual fund investment contribution as your income grows.

The bottom line

You can use mutual fund investments for goal-based investing for a range of medium-term and long-term goals. Whether you opt for the SIP option or lumpsum investment option, the benefits of diversification and long-term wealth creation remain the same. You can use a lumpsum calculator and an SIP calculator to understand what aligns with your goals better. Having clarity on your goals and the way to meet them will help you stay motivated, budget accordingly, and materialise them in your desired timeline.

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