Q. I am 27. In the next 3 to 4 years, I want to buy a house worth ₹3 crores, in Mumbai. My annual income is around ₹15 lakhs and I have savings of ₹10 lakhs in my name. The immediate target is to raise ₹50 lakhs to ₹60 lakhs in the next 3 to 4 years for the down payment. I want to start investing through a SIP. How much should I start putting away and in which fund?
A systematic investment plan (SIP) is a convenient and disciplined way of investing in mutual funds. It allows you to invest a fixed amount regularly, which helps you accumulate a significant corpus over time. Like other investments, mutual funds too come with market risks. Therefore, it is important to be aware of the options available to you before you commit to any investment.
First, decide on the monthly investment commitment after considering:
Your goal: Build a corpus of ₹50 lakhs to ₹60 lakhs in the next 3 to 4 years for the down payment.
Your monthly budget: Revisit your budget regularly to identify the surplus income that can be used to build this corpus.
Critical near-term requirements: Along with your monthly surplus, you must also identify if you have any critical requirements coming up soon. You may need to use your savings of ₹10 lakhs to fund these.
Emergency funds: Regardless of your goals, you must set aside an emergency corpus that can meet 3 to 6 months of your regular expenses, should something unforeseen affect your income.
Your risk profile: The appetite for risk varies from individual to individual. If you are a conservative investor, you may prefer to invest a larger portion into debts, rather than equity. If you are comfortable with taking risks, you may choose more equity. You might also consider investing in a balanced or hybrid category of mutual funds.
As a conservative estimate based on your need and the time available, your portfolio is likely to yield around 8% to 9% per annum. Let us assume you will use the already available investment to meet immediate goals and to build an emergency corpus.
So, for the house you have in mind, starting now, you will need to invest around ₹1,20,000 to ₹1,25,000 per month for the next 3 years. Build a portfolio that’s well diversified and can provide the right risk-adjusted returns.
Investing in mutual funds through SIPs can help you achieve your ambitious goal, but it's important to be well-informed and proceed with a clear investment plan. Diversify your portfolio, select the right mutual funds, and consult a financial advisor to help you minimise risks and optimise returns.
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