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Is my current monthly SIP amount good enough to take care of retirement after 25 years

I am 26 years old now and have been investing for past 6 months in certain MF. Can you please review my MF portfolio 1. Axis Long Term Equity - Direct (G) - Rs.5000 2. Reliance Tax Saver Direct (G) - Rs. 2500 3. UTI MNC Fund Direct (G) - Rs.3000 4. ICICI Value Discovery Fund Direct (G) - Rs.2000 5. UTI Mid Cap Fund Direct (G) - Rs.1500 6. Mirae Emerging Bluechip Fund Direct (G) - Rs.1500 Can I generate enough wealth to be financially independent in next 25 years considering my monthly expenditure is Rs.35000 I am also planning to increase my SIPs by atleast 10% each year. Also with increase in investing capacity, is it prudent to increase investment in same funds and you can see I am already investing in 6 different funds. Thanks in Advance

Apr 30, 2016 by Rohan Ture, Mumbai  |   Mutual Fund

1. Congratulations for choosing SIP investing for your long term wealth creation. The funds selected by you are good and no need of any changes at this point in time. However, the portfolio performance including individual scheme performances need to be reviewed once every year to see if they are still aligned to your goals.

2. Your current monthly expenses are 35,000. Considering that you want to maintain the same lifestyle, your monthly expenses after 25 years would be 150,000 taking inflation in account @ 6% per annum

3. You are currently investing Rs. 15,500 through month SIPs. If you continue to invest the same amount for next 25 years then the total fund accumulation from these SIPs would be around 2.94 Crores and 4.22 Crores assuming returns of 12% and 15% respectively. Returns @ 15% or more is a great possibility considering that your investment horizon is quiet long and thus power of compounding will help you immensely

4. Therefore, to meet your expenses of 150,000 per month you should invest your wealth accumulated through these SIPs in secured investments post retirement, which will give you an yield of atleast 7%. Therefore if you get 7% return on your approx accumulated wealth of even Rs. 3.50 Crores you will easily get a monthly return of Rs. 200,000! So, we can conclude that your current strategy to save through SIPs is good enough to take care of your future expenses.

5. With regards to increasing your SIPs by 10% per annum, please note that it can potentially end up enhancing your accumulated wealth further by 50%. Therefore, if you can, please increase the SIPs by 10% every year and have a even better life post retirement.

6. We will suggest you not to increase number of schemes for your SIPs when you are increasing the annual SIP contribution by 10% or otherwise. As mentioned in point no. 1, during your annual fund review you will be able to notice which are the best performing funds in your portfolio, accordingly, increase the monthly SIP contribution in these.

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