Retirement Planning, Power of Rs 3,00,000 one-time Investment: Any investment made for a long time may generate surprising results for many investors. It may convert a small investment into a giant corpus. It may help one achieve their major financial goals with a small investment. The power of compounding works to maximise returns in the long term. Anyone who is seeking significant returns from their investments need to have the patience of staying in their investments for a long term.

The outcome of it may guide them to achieve their financial goals.

For a long-term investor, even a Rs 3,00,000 one-time investment may generate over Rs 52,000 monthly income for 30 years through systematic withdrawal plan (SWP). Know it may be possible.

How one-time investment grows

When we talk about a one-time (lump sum) investment in market-linked investment tools such as mutual funds, it is very difficult to gauge the right time to invest.

One can’t time market. So, what should be the way out.

A one-time investment is suitable for investors with a long-term investment horizon.

The reason is that, in the short term, the market may go through various ups and downs in the short term.

Investment may turn negative if the market slips sharply.

However, when we cast a glance on the market’s long-term return, it leaves investors with profit. 
 

What is SWP in mutual fund?

It’s a method to withdraw a corpus from a mutual fund in a systematic way.

The investor invests an amount in a mutual fund and tells the fund house to withdraw a fixed amount every month to deposit in their account.

The fund house sells fund units of the same value and deposits the amount to the investor’s account. 

How Rs 3,00,000 one-time investment can generate over Rs 52,000 monthly income  

Let’s understand it how it may do it in 2 phases. In the first phase, we will let the amount grow for 30 years, and in the next phase, we will withdraw an amount from it for the next 30 years.

For the one-time investment, we will expect a 12 per annualised return, while from the SWP investment, we will expect a 7 per cent annualised return. 

Corpus from Rs 3,00,000 one-time investment in 30 years

In 30 years, the estimated capital gains from this investment will be Rs 86,87,977, while the estimated corpus will be Rs 89,87,977.

Income tax on corpus

Since it is long term capital gain (LTCG), there will be Rs 1,25,000 exemption on LTCG. After that, the interest rate is 12.5 per cent.

The estimated tax will be Rs 10,70,372.125, and the post-tax corpus will be Rs 79,17,604.875. This will be the SWP mutual fund investment amount.

Monthly Income for 30 years

At a 7 per cent annualised return, the investor can withdraw an estimated monthly amount of Rs 52,370 for 30 years.

(Disclaimer: These are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)