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It is the biggest dream of every parent that they should not let any kind of financial constraint come in the way of their daughter’s marriage and higher education. At present, a respectable budget easily reaches ₹40 to ₹50 lakh when adding up wedding expenses, venue, catering, jewelery and other arrangements. If the daughter is still young and there is still 10 to 15 years left for marriage, then the biggest mistake people make is that they rely on bank FDs or traditional insurance policies, where the interest of 5% to 6% cannot even beat inflation. In contrast, Systematic Investment Plan (SIP) in mutual funds is a disciplined approach that transforms your small savings into a huge fund through compounding. It is important to understand the exact financial mathematics of how many years it will take to reach the magical figure of ₹50 lakh if you start a disciplined saving of ₹10,000 every month from today itself.
The historical average returns of equity mutual funds over the long term have been seen in the range of 12% to 15% per annum. The time taken to build a corpus of ₹50 lakh based on different rates of return is as follows:
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At an estimated return of 12% per annum (about 14.5 to 15 years): If your portfolio grows at an average annual rate of 12%, it will take you approximately 14 years 7 months (about 15 years) It will take time. Your total pocket money during this period will be around ₹17.5 lakh, while the estimated net profit from compounding will be around ₹32.5 lakh.
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At an estimated return of 15% per annum (about 12.5 to 13 years): If your investments are in a balanced mix of flexi cap and mid cap funds and it gives an annualized CAGR return of 15%, you will reach this milestone of approx. 12 years 8 months (about 13 years) I will achieve it myself. Your actual investment in this will be around ₹15.2 lakh and the total fund will cross ₹50 lakh, resulting in a net return of more than ₹34.8 lakh.
If you do not want to wait for 14 or 15 years and want to fund your daughter’s marriage in just 10 to 11 years, then ‘Step-Up SIP’ is the most effective strategy. Increase your monthly SIP by just 10% every year as your income or salary increases. That means ₹ 10,000 per month in the first year, ₹ 11,000 per month in the second year, ₹ 12,100 per month in the third year. Even at an average return of 12%, adopting a 10% annual step-up would result in a corpus of only ₹50 lakh. 11 years I get ready. With this strategy, your time is reduced by 3 to 4 years and the funds reach your hands before the stipulated time without putting any extra burden on the budget.
For an emotional and non-negotiable goal like daughter’s marriage, portfolio selection should be done very carefully. If you have a time horizon of more than 10 years, 50% allocation can be in large and mid cap or Nifty 50 index funds, 30% in flexi cap funds and 20% in good quality mid cap funds. Most importantly, when 2 to 3 years are left for the wedding date, do not leave all this money exposed to the ups and downs of the equity market. At that time, gradually shift the money every month to a safe liquid fund, short term debt fund or bank fixed deposit through Systematic Transfer Plan (STP). This way, any possible fall in the market will not affect your daughter’s wedding funds and your plan will be completed without any hindrance.