Is it possible to earn Rs. 1 crore from mutual funds?

KBC (Kaun Banega Crorepati) has lured many people to earn one crore rupees. But still winning one crore from the Hindi game show is as tough as getting one crore from mutual funds. Though mutual funds have an edge due to taxation. The winnings from Kaun Banega Crorepati is considered a gift and is taxed flat at the rate 30 per cent, which means even if you win one crore rupees at KBC, you would be getting the post-tax income of only Rs. 70 lakhs which would be much less than that from mutual funds.

Unlike the show hosted by Bollywood star Amitabh Bachchan, to earn one crore post-tax from mutual funds in 20 years it is assumed that you will need to earn around Rs. 1.11 crore to take care of your tax.  It is assumed that the rate of return is assumed to be 10 per cent which is arrived from average 3 years returns of both debt and equity mutual funds (large-cap mutual funds for equity and short-term debt fund for debt) with 50 per cent allocation to equity and 50 per cent allocation to debt. The effective long-term capital gains tax rate is assumed to be 10 per cent. So to earn one crore post-tax, you would need to save Rs. 15,850 per month for 20 years via SIP (Systematic Investment Plan) mode or if you already have Rs. 17.35 lakhs then by investing it in mutual funds with above assumptions can help you earn Rs. one crore in 20 years. It is to be noted that in the above illustration inflation is not considered.

As Kaun Banega Crorepati is all about your knowledge and luck, investment in mutual funds is all about market situations, sentiments, reasonable assumptions and your discipline. In KBC, speculating may cause huge fall in your level and the price amount. Even in mutual funds investing on the basis of speculations would lead to huge losses.