Becoming crorepati by investing in mutual funds? Radhika Gupta says, ‘Yes, you can’; but be consistent first

In the recent edition of FE.com’s Manage Your Money, Radhika Gupta said she thinks young investors, early in their careers, can become a crorepati, but they will have to start with a meaningful amount and a long term view of 15 to 20 years.

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Radhika Gupta, MD & CEO, Edelweiss Mutual Fund

Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, has valuable advice for young investors, quite literally. In the recent edition of FE.com’s Manage Your Money, Radhika Gupta said she thinks young investors, early in their careers, can become a crorepati, but they will have to start with a meaningful amount and a long term view of 15 to 20 years. “What is important is to develop the habit of investing consistently,” she said.

“Today as a young person, you don’t have Rs 25 lakhs or Rs 50 lakhs that will become a crore. Most of us are salaried professionals with limited income. But within that constraint, if you build this habit (of investing consistently), and you do this month-on-month, and you ride out the corrections and don’t redeem during the corrections, which is easier said than done, and you don’t stop those SIPs, you will be surprised 15 years later that crorepati outcome is not a difficult one,” Gupta said.

Manage Your Money: Become a Crorepati with Mutual Fund Investing

Advising young investors on the kind of funds that should constitute their portfolio, Gupta suggested they should invest in five categories of mutual funds. The core category would have i) large-mid cap or a flexi fund, ii) mid/small cap or a hybrid fund, iii) two fixed income funds, and then the satellite investment could be in US stock based funds or thematic funds, she said. Gupta, who is also vice chair at the Association of Mutual Funds in India, said she believes on an average an investor can expect 12 to 15 per cent returns from equity funds, 5 to 7 per cent returns from fixed income funds, and closer to 11-12 per cent returns from balanced funds.

‘Have realistic expectations’: Gupta on why pandemic years can’t be a benchmark for investments

“What is very important is to have realistic expectations. The last two years have been exceptional years in terms of equity markets. And people almost feel that 20 to 30 per cent returns are guaranteed. It is not,” she said. “People get 12 to 15 per cent returns on an average and average here is a dangerous word.” Returns do not come consistently, Gupta said, adding that you may get +30 per cent returns and you may also get -20 per cent. “The reason you get higher than fixed income markets is because you incur the volatility. So when one says 12-15 per cent returns, remember it is not year-on-year,” she further explained.

Asked about whether an investor who is investing with a view of 10 to 15 years can benefit during periods of correction, Gupta said periodic corrections and time corrections in the market are very good. If you are a disciplined investor, and you don’t exit during that period, you can accumulate wealth, she added.

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