New Delhi. Mutual funds have become the preferred choice for investors. Under SIP, you can invest in mutual funds in installments. Today we will understand with the help of SIP calculation, how long will it take to generate a fund of Rs 20 lakh with a SIP of Rs 2000 every month?
If a person does a SIP of Rs 2000 every month, it will take him 20 to 21 years to build a corpus of Rs 20 lakh. Your only principal amount in these 21 years will be Rs 5,40,000. With this only Rs 17,73,000 can be received in return.
In mutual funds, do not just look at the returns, also keep in mind the risk factor.
Which risk factors should be kept in mind
If this benchmark is less than 1, the fund you have chosen is low risk. Whereas if it is more than one then it is considered risky.
Standard deviation is seen when we compare any two funds. The lower the percentage, the less risky the fund is considered to be. Suppose the standard deviation of one fund is 5 percent and that of the other is 10 percent, then the first fund will be less risky.
Through Sharpe ratio you can easily find out the risk in mutual funds. If the Sharpe ratio is less than 1.00, the risk will be low. If the Sharpe ratio is between 1.00 to 1.99, then the risk will be normal. Similarly, if the Sharpe ratio is 2.00 to 2.99, then the risk will be very high.
If the Sharpe ratio is more than 3, then the risk in such a fund is very high.
(Disclaimer: The information given here on mutual funds is not investment advice. Jagran Business is not giving investment advice. There can be risk in the stock market, so please consult a certified investment advisor before investing.)
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