I plan to buy a house three years from now and need Rs 15 lakh as down payment for the same. I can save Rs 30,000 a month. Please suggest a suitable approach to achieve this goal
If the Rs 30,000 that you plan to invest earns 20 per cent return, it will create a corpus of Rs 14.8 lakh, which is not impossible to achieve by investing in mutual funds. However you need to build a portfolio of funds that can collectively help you achieve this target. For this, the core portfolio should comprise funds that are not prone to violent swings such as large-cap funds, index funds and large- and mid-cap funds.
You can consider Franklin India Bluechip, ICICI Prudential Growth or IDFC Imperial Equity Plan A from the large-cap funds or HDFC Top 200, Fidelity Equity or Birla Sun Life Frontline Equity Plan A from the large- and mid-cap category for the core component of your portfolio. This should enable the portfolio to cushion against market swings with its steady returns.
The satellite portfolio should comprise of high alpha-generating funds such as mid- and small- caps, sector funds and even thematic funds. You can consider IDFC Premier Equity Plan A , ICICI Prudential Discovery or DSPBR Micro Cap fund for this allocation. The main advantage of this approach is that it is flexible and can be modified according to your risk appetite.
Alternately, you can consider increasing your savings to achieve your goal.