What is the optimum MF allocation to accumulate Rs. 1 crore?

When one hears that an xyz thing can make them crorepati their eyes pop out and they run behind it. But there are many such Ponzi schemes in the market which you may fall prey to and end up losing your entire money rather than earning something out of it. The thing to remember here is there is no shortcut to becoming a crorepati and neither can you become a crorepati overnight. Even investment in stocks and MFs require discipline, good emotional quotient and a lot of patience. So, what MF allocation should you adopt to become a crorepati in 10 years?
 
When it comes to mutual fund investment it is important to note that you need to first assess your risk appetite and then based on it take investment decisions. Risk profile will help you manage your emotional quotient. There is no standard MF portfolio which you can say is optimal for everyone. As situations, circumstances and life events differ from person to person, it is important to have your own unique investment plan which would suit your requirements.
 
Let us assume that you are a moderate risk taker, let's find out how much you need to invest today and in which categories of mutual funds to accumulate Rs. 1 crore in 10 years. Being a moderate risk taker with a 10-year investment horizon, you should invest 10 per cent in large-cap equity MF; 30 per cent in multi-cap equity MF; 20 per cent in mid-cap equity MF; 25 per cent in a dynamic bond fund and remaining 15 per cent in corporate bond funds. The 10-year average returns provided by these categories are 16.13 per cent, 18.79 per cent, 22.92 per cent, 7.40 per cent and 7.39 per cent respectively. The weighted average return of the portfolio comes to around 14.79 per cent.
So, assuming that you would earn 14.79 per cent CAGR (Compounded Annual Growth Rate) p.a. throughout the tenure, to become a crorepati you would need to do a SIP (Systematic Investment Plan) of Rs. 38,500 per month for 10 years or you may also opt to invest via lumpsum where you would need to invest Rs. 25.18 lakh to become a crorepati in 10 years.
 
So, now as you know how much to allocate and where you can plan your investment accordingly. Remember to change the asset allocation as required and do rebalancing, annually. Also, the above example only covers the portfolio for moderate risk taker. However, if you are a conservative risk taker then the investment category would change and so will your portfolio’s weighted average returns. As a conservative risk taker to become a crorepati in 10 years you would require to invest much more in terms of SIP and lumpsum investment and in case of an aggressive investor you would require less investment in SIP and lumpsum as the portfolio would be much inclined towards equity and risk, but returns would be on the higher side.