I'm 20 and earn Rs 76,000 a month. How much monthly investment is needed to save Rs 1 crore for a house by age 28, and where should I invest?

I  am 20 years old and am currently earning Rs 76,000 per month. My monthly expenses are Rs 30,000 (including rent, electricity and all other miscellaneous expenses). I invest Rs 36,000 per month in mutual funds. The rest of the money goes into fixed deposits. I am planning to buy term insurance soon. I want to be able to save Rs 1 crore for a house by the time I turn 28. How much should I invest every month? Where should I invest this money?

Reply by Rajiv Bajaj, Chairman & MD, BajajCapital Ltd.

Investing a monthly SIP investment of Rs 63,000 for the next 8 years could potentially build a corpus of around Rs 1 crore, assuming an average annual return of 12%. However, considering your current monthly income limitations, it's practical to reevaluate your approach to strike a balance between financial growth and investing and meeting everyday expenses.

A more realistic strategy involves initiating a monthly SIP of Rs 35,000, ensuring a more sustainable approach that caters to both wealth accumulation and daily spending needs. Using future salary appraisals to channel incremental savings into equity-oriented mutual fund schemes through SIPs makes financial sense, expediting your progress towards your monetary objectives.

For a diversified and resilient portfolio, consider dividing your monthly SIP equally among various funds, such as Kotak Multi Cap Fund, Nippon India Multi Cap Fund, HDFC Mid Cap Opportunity Fund, Nippon India Growth Fund, Parag Parikh Flexi Cap Fund, and Bandhan Small Cap Fund. This spread covers different categories and asset management companies, offering a well-rounded investment approach.

Also read:  I am 25 and have started investing in life insurance policies and equity mutual funds schemes. Will the money received after 10 years be taxable in my hands?

Also read:  I’m 62 and have a corpus of Rs 5 crore. My spouse is working, and son is settled abroad. Do I need a term insurance plan?

Regularly reviewing your portfolio, preferably on an annual basis, is a practical step. This ensures that your investments remain in line with your financial goals and adapt to changing market conditions. By making these adjustments, you enhance your chances of achieving your financial objectives in a more realistic timeframe.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)