Monthly Income From One-time Investment: Can your Rs 10,00,000 lump sum deposit help you get Rs 1,75,000 monthly income for 30 years?

Starting to invest early helps one create a significantly larger corpus compared to a late beginning. Just a year's difference can make a huge difference in the long term. Let's understand it with a couple of examples. A and B invest Rs 12 lakh as a lump sum amount in a mutual fund scheme. A wants to invest it for 35 years. B wants to invest for 34 years. Both expect a 12 per cent annualised return from their investment. Let's see what their estimated corpus can be in those periods. In 34 years, B's estimated capital gains will be Rs 5,53,71,021, and the estimated corpus will be Rs 5,65,71,021. In 35 years, A's estimated capital gains will be Rs 6,21,59,543, and the estimated corpus will be Rs 6,33,59,543.

Let's see, had A stayed in their investment for just 1 more year, what would they have got? In 36 years, estimated capital gains will be Rs 6,97,62,689, and the estimated corpus will be Rs 7,09,62,689. A difference of just 2 years can take the corpus by nearly Rs 1.50 crore. 

Here A wants to invest Rs 11,000 in a monthly SIP investment for 35 years and B for 32 years. Both expect a 12 per cent annualised return from their investment. Let's see how large a corpus they may generate. In 32 years, B's total investment will be Rs 42,24,000, estimated capital gains will be Rs 3,85,86,215, and the estimated corpus will be Rs 4,28,10,215.

In 35 years, A's total investment will be Rs 46,20,000, estimated capital gains will be Rs 5,59,99,142, and the estimated corpus will be Rs 6,06,19,142. Just nearly Rs 4 lakh of extra investment and 3 years of extra time can make a difference of nearly Rs 1.80 crore in the long term.

Now imagine you invest Rs 10,00,000 in a mutual fund and expect a 12 per cent annualised return from it. Do you know that in the 20th year, your 1-year return will be more than Rs 10 lakh? In the 19th year, estimated capital gains will be Rs 9,22,796, while in the 20th year, estimated capital gains will be Rs 10,33,532. The power of compounding makes it happen.

A and B want to create a Rs 7 crore corpus by the age of 60. A has 35 years to achieve it, while B has 30. Both expect a 12 per cent annualised return on their investment. Let's see what their estimated investment will be to achieve that target. A can achieve that goal with an estimated monthly SIP investment of Rs 10,888, where their overall investment will be Rs 45,72,960.

B can achieve that goal with an estimated monthly SIP investment of Rs 19,475, where their overall investment will be Rs 70,11,000. A started 5 years earlier and achieved the same target with nearly Rs 36 lakh.

In SWP, you order the mutual fund house to sell net asset value (NAV) units worth a fixed amount every month. The advantage of it is while you get an amount every month, your corpus will most likely keep growing. This also saves the corpus from extreme market fluctuations as investors use SWP for a long term.

In our calculations, we will show how a Rs 10,00,000 one-time investment may grow in 30 years. In the second phase of the calculations, we will show how one may withdraw a monthly estimated amount of Rs 1,74,300 from the same amount for 30 years. If a 25-year-old person makes a lump sum investment at 25 years of age, they may see their corpus grow by 55 years of age. At that stage, they can invest in a hybrid or conservative fund and start a SWP from there.

We are expecting a 12 per cent annualised return from the investment for 30 years. In 30 years, estimated capital gains will be Rs and the estimated corpus will be Rs 2,89,59,922 and the estimated corpus will be Rs 2,99,59,922.

One can start SWP from the same corpus, and they don't have to pay tax on the entire corpus. But a 12 per cent annualised long-term growth is possible on an equity fund, which is highly vulnerable to market fluctuations. So starting an SWP in the same fund may be quite risky. So we may start SWP from a hybrid conservative or debt fund where the risk on the corpus is minimum.

Since it's a long term capital gains (LTCG), the investor will get an exemption on Rs 1,25,000 LTCG. On the rest of the corpus, LTCG will be 12.5 per cent. The total estimated tax will be Rs 36,04,365.25. Post-tax estimated corpus will be Rs 2,63,55,556.75.

Rs 2,63,55,556.75 is the estimated SWP investment amount, where we expect a 7 per cent annualised return. 

The investor can generate an estimated monthly income of Rs 1,74,300 for 30 years.

The estimated withdrawn amount in 30 years will be Rs 6,27,48,000, and the estimated balance after withdrawing that amount will be Rs 33,459.