Generating a substantial passive income of ₹1,00,000 per month through equity mutual funds requires a well-structured approach, a significant investment corpus, and a disciplined withdrawal strategy.
1. Building the Investment Corpus:
- Determine Corpus Size: Calculate the required investment corpus based on your desired monthly income and expected rate of return. A common approach is the "4% rule," which suggests you can safely withdraw 4% of your investment corpus annually without depleting it significantly. For ₹1,00,000 monthly income (₹12,00,000 annually), a corpus of approximately ₹3 crore may be needed.
- Invest Strategically: Choose a mix of high-performing equity mutual funds (e.g., flexi-cap, multi-cap, large & mid-cap) to maximize potential returns. Start with a diversified approach, allocating a significant portion of your portfolio to equity funds for long-term growth.
- Systematic Investment Plan (SIP): Invest regularly through SIPs to benefit from rupee-cost averaging and potentially mitigate market volatility. SIPs also instill disciplined investing habits.
- Reinvestment: Reinvest dividends and capital gains back into your portfolio to leverage the power of compounding.
2. Generating Passive Income:
- Systematic Withdrawal Plan (SWP): Once your corpus reaches the desired level, start a SWP from your equity mutual funds to generate a regular income stream.
- Withdrawal Amount & Frequency: Decide on the fixed amount you wish to withdraw monthly (e.g., ₹1,00,000) and the withdrawal frequency (monthly, quarterly, etc.).
- Tax Efficiency: Optimize your SWP strategy for tax efficiency, potentially timing withdrawals to benefit from lower long-term capital gains tax rates.
3. Choosing the Right Equity Mutual Funds:
- Analyze Historical Performance: Evaluate past performance of equity mutual funds, considering both absolute returns and returns relative to benchmark indices and peer funds.
- Consider Fund Manager Expertise: Look for funds with experienced and skilled fund managers with a proven track record.
- Evaluate Expense Ratio: Choose funds with reasonable expense ratios to minimize costs and maximize returns.
- Diversify Across Categories: Consider diversifying across different equity mutual fund categories (e.g., large-cap, mid-cap, small-cap, flexi-cap, multi-cap) to spread risk and potentially enhance overall returns.
Important Considerations:
- Time Horizon: Building a substantial corpus takes time and requires a long-term investment horizon.
- Risk Tolerance: Equity mutual funds are subject to market risks, so assess your risk tolerance before investing. Choose a strategy aligned with your comfort level.
- Inflation: Factor in inflation while planning your monthly income requirements and adjust your SWP withdrawals accordingly.
- Professional Advice: Consider consulting a SEBI-registered investment advisor for personalized guidance and fund recommendations.
Note: Past performance is not indicative of future returns. Market conditions can change, and equity mutual fund investments are subject to market risks.
Disclaimer: This information is for educational purposes only and should not be considered as investment advice. Consult with a qualified financial advisor before making any investment decisions.
Views are Personal!
Thank you for your continued partnership and trust in us. We look forward to supporting your investment journey.
Regards,
Ritesh Sheth CWM®
(Chartered Wealth Manager)
AMFI Registered Mutual Fund Distributor
ARN-0209 | EUIN-E030691
Note: Past performance is not indicative of future returns. Market conditions can change, and equity mutual fund investments are subject to market risks.
Disclaimer: This information is for educational purposes only and should not be considered as investment advice. Consult with a qualified financial advisor or Mutual funds distributor before making any investment decisions.
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