Retirement Planning via One-time Investment: 20, 25, or 30? In how many years, your Rs 7,50,000 lump sum deposit can generate Rs 2,25,00,000 fund?

One can start their retirement planning by making a periodic or one-time investment. They can invest in market-linked or non-market-linked investment options to build a retirement corpus.

When one is creating a retirement portfolio, the diversification of it is very important. Most assets should not be interlinked in terms of performance. So, even if one asset is performing poorly, the other asset should perform okay or shine. So, one can have fixed interest assets, stocks, mutual funds, gold-related assets, and real estate in their retirement portfolio. 

Since you are planning your retirement at a particular age, you need to review your retirement planning after every few months. Taxation rules, interest rates, and market situations change, so you need to change the strategy according to them. The end results should be to achieve the retirement corpus goal on time or before it.

Many investors have a monthly earning cycle. For such investors, periodic investments such as a systematic investment plan (SIP) in a mutual fund scheme may be suitable if they want a market-linked investment option. 

There can be many occasions when an individual may get a lump sum amount in their life. The amount may come in the form of an office bonus, windfall, or ancestral property share. In such a case, they may also opt for a mutual fund lump sum investment. However, in such a case, their investment horizon should be long to counter short-term market fluctuations. 

As we said in the beginning, a long-term investment may help create a large retirement corpus from small investments. Let's understand this point through a couple of examples.

Here, we are taking the example of an Rs 8,333 monthly SIP investment. Let's see what it can do in 10, 20, 30, and 40 years at a 12 per cent annualised return. In 10 years, the total investment will be Rs 9,99,960, estimated capital gains will be Rs 8,66,931 and the estimated corpus will be Rs 18,66,891.  In 20 years, the total investment will be Rs 19,99,920, estimated capital gains will be Rs 56,65,251 and the estimated corpus will be Rs 56,65,251. 

In 30 years, the total investment will be Rs 29,99,880, estimated capital gains will be Rs 2,26,73,870 and the estimated corpus will be Rs 2,56,73,750.  In 40 years, the total investment will be Rs 39,99,840, estimated capital gains will be Rs 7,76,05,821 and the estimated corpus will be Rs 8,16,05,661. Every 10 years, the corpus is increasing faster with time because of the power of compounding.

Now let's see how the power of compounding works in the long-term investment. Here, we are taking the example of a Rs 2,00,000 one-time investment and seeing how it may grow at a 12 per cent annualised return in 10, 20, 30, and 40 years. In 10 years, estimated capital gains will be Rs 4,21,170 and the estimated corpus will be Rs 6,21,170. 

In 20 years, estimated capital gains will be Rs 17,29,259 and the estimated corpus will be Rs 19,29,259.  In 30 years, estimated capital gains will be Rs 57,91,984 and the estimated corpus will be Rs 59,91,984.  In 40 years, estimated capital gains will be Rs 1,84,10,194 and the estimated corpus will be Rs 1,86,10,194.

We will show in how many years a Rs 7,50,000 one-time investment in a mutual fund scheme may grow to a retirement corpus of around Rs 2,25,00,000. Let's see its different phases.

In 10 years, estimated capital gains will be Rs 15,79,386 and the estimated corpus will be Rs 23,29,386. 

In 20 years, estimated capital gains will be Rs 64,84,720 and the estimated corpus will be Rs 72,34,720. 

In 30 years, estimated capital gains will be Rs 2,17,19,942 and the estimated corpus will be Rs 2,24,69,942. 

We can see that staying patient in investment may pay rich dividends. A small amount can grow to a large corpus, helping you achieve many of your financial goals.