Saturday, March 21, 2009

MY TARGET -- 1 CRORE IN 10 YEARS


Mr.Prakash Punekar wrote :
Hi Srikanth,

I visited your blog(goodfundadvisor.blogspot.com). I appreciate your good work.
I am new to mutual funds and want to seek advise from you.

I have started SIP since jan 06, 2009 (actually, I was about to buy satyam shares but did't) :
1. UTI Dividend Yield Fund - Growth (UT189) - 1500/month for 5 years.

I am planning to have 3000-4000 rs per month in couple of more funds for 5-10 years of horizons.
Right now I am in USA.
I would appreciate your advise on selection of funds. plan to am expect good returns in next 10-12 years through these investments.
My target is to have a corpus of Rs.1 Crore in about 10 years from now.

Thanks for your time and efforts.
Prakash Punekar.

SRIKANTH SHANKAR MATRUBAI replied
Dear Prakash Punekar,
Thank you for your kind words.
It is really a matter of Great Luck that you didn't buy Satyam Shares. Just see what a Bad turnaround it had. My God, such a Big Fraud, and no one had even a Clue to it.
Anyway, coming to your investments. Right now your money is going into a Right kind of Fund for this Market, continue with your investment in UTI dividend Yield Fund.
But do keep a track on the same and reconsider if there are any significant changes in the market scene or the portfolio composition.
For your further investment plan of 3k-4k, I would suggest 5 funds, out of which you can choose as per your convenience. The fact that you investment horizon is more than 5 years makes my job easy and you too will have a fairly good chance of earning Better Than Markets Returns.

My picks are :

1. Birla sunlife Equity Fund

2. DSPBR Top 100 Fund

3. Fidelity Equity fund

4. HDFC Prudence Fund

5. Sundaram Select Focus Fund.


Out of the above Funds, Fidelity (500) and Sundaram (250) have Minimum Sip Investment of less than 1000, and therefore, in these funds you can also consider investing at different Dates to maximise returns making use of NAV Volatility.

However, your Target Return Expectation of 1 Crores in 10 years out of these investments look Overoptimistic. Assuming a Realistic Return of 18%, you need to invest Rs.32354 monthly to get your target return of 1 crores.
However, if a assume a slightly Higher Return of 20% compounded, even then you need to invest monthly Rs.29044!!!

With this investment of Rs.5500/- per month for a period of 10 years, at a Return of 20%, The End value of your investment would be only 18,93,711 on an Amount Actually Paid by you of Rs.6,60,000.

For this 5500monthly to grow into 1 crore at 20% return, you need to wait for 18.5years.
The best option is to increase your Sip input value, if not now, as and when it is possible.

Best of luck,
Srikanth Shankar Matrubai,


Also visit http://equityadvise.blogspot.com for an indepth Equity Analysis

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