How much should I invest in mutual funds to build Rs 40 lakh in 5 years?

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I want to start an SIP in mutual funds. My goal is to build a corpus of Rs 40 lakh in five years to buy a new home. Can you please suggest hybrid/balanced funds? Also, how much should I invest every month? I am already investing in equity funds for the Section 80C benefit. My risk level is moderate to high.
-Renjith


You hardly have five years. That means you cannot invest in risky mutual funds. You should play it safe by sticking to hybrid funds or dynamic allocation funds (they are officially called balanced advantage funds) or multi asset funds. If you are going to invest in hybrid schemes, you should decide on the equity allocation based on your risk profile and return expectations.

If you are going for an aggressive hybrid scheme (it invests 65-80% in equity), you should try to flexible about your home buying. We typically ask investors to invest in equity schemes only if they have an investment horizon of five to seven years. So, be prepared to postpone your home buying by a few years. If you are ready to do that, you may also consider investing in a large cap scheme (active or passive).


You should also lower your return expectations. Equity mutual funds deliver double-digit returns over a long period. However, you cannot expect the same kind of returns when you are investing with a short period of five years. You are lucky if you manage to pocket very good returns. So, you can assume around 9-10% returns while calculating your SIP amount. Assuming an annual return of 10%, you need to invest around Rs 51,000 every month.

Note, this is a rough calculation. You need to seek the help of an investment advisor if you want find out exactly how much you need to invest. He will ask for your personal details and financial situation and include those inputs in the calculation.

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