I am planning to invest Rs 14,000 per month with the objective of generating Rs 13-15 lakh in 5 years which I will need for real estate investment. I am planning to divide this amount in to 2 mutual funds for Reliance MIP with Rs 10,000 per month (Conservative), DSPBR Small and Mid Cap Reg Rs 4,000 (Aggressive). Your views on this strategy.
— Ashish Chandras
Investing over five years to buy real estate is a good move. If the monthly SIP of Rs 14,000 earns 18 per cent, it will build a corpus of Rs 13.7 lakh but if it earns 20 per cent, the corpus works to Rs 14.5 lakh. Your goal of building a corpus of Rs 13-Rs 15 lakh over the next five years is possible by investing in equity mutual funds. Your selection of funds is confusing; you have opted for a mid- and small-cap fund and an MIP. While the mid- and small-cap fund has the necessary objective to achieve your goal, the choice of a monthly income plan is baffling. These funds invest only up to 20 per cent in equity, with the rest in debt instruments and provide regular income. Your need is to build wealth for which you need investments in mid- and small-cap funds such as DSPBR Micro Cap or ICICI Prudential Discovery or large- and mid-cap funds such as Fidelity Equity, Birla Sun Life Frontline Equity Plan A or HDFC Top 200. You can still achieve your goal if your risk taking ability is less; you will need to increase your monthly investments to achieve the desired goal.