SIPs for 15yr: Should I plan my retirement corpus assuming 18% returns like the last few years?

Anchor your long-term equity return expectations to India's nominal GDP growth which realistically translates to 12% to 14% returns over time.

It is very tempting to look at recent portfolio statements and project those outsized returns into the future. When you see your funds delivering 18% or 20% it feels like you will reach your retirement goal much faster than planned. But expecting past outsized returns to continue indefinitely is a recipe for disappointment.

We have to look at the macroeconomic reality driving these markets. The most reliable way to forecast long-term equity returns is to anchor them to the country's nominal GDP growth. Right now the government is expecting about 10% nominal GDP growth next year.

If India's long-term nominal GDP growth settles around 11% to 12% then equity markets historically deliver returns in the 12% to 14% range. This aligns perfectly with brokerage estimates predicting a 12% to 15% earnings growth trajectory for companies. Corporate sales and earnings are nominal figures so they track closely with that nominal GDP expansion.

When you build your 15yr retirement plan you should model your corpus using a conservative 12% return assumption. If the market ends up giving you 14% or more then that is simply a pleasant bonus. Stick to your systematic investment plans and do not alter your core strategy based on short-term market euphoria.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.