How should I accumulate ₹1 crore in six years to fund my home?

My husband and I earn ₹20 lakh annually and invest ₹40,000 every month via a systematic investment plan (SIP) which I started two months ago. I have ₹3 lakh in direct stocks and some investment in gold. We want to accumulate ₹1 crore in six years for the down payment of our home. Do we need to step up the monthly investment every year? If so, how do we go about with it?

—Name withheld on request

Your plan to step up the SIPs every year to build a downpayment corpus is good as you would have been able to reach around ₹44-48 lakh with the present monthly investment in six years if we assume an annual return of 10% and 12%.

To cover the difference amount, a step-up strategy will be quite effective. Assuming the same rate of returns, you need to increase your SIPs by 35-40% every year.

In the fifth year, you will need to invest almost 3 to 4 times what you are doing right now. If this step-up is quite high, which usually is between 10% and 25% for most of the investors, then you will either have to increase your monthly investment from here onwards or push the goal ahead.

While we do not have the details of your cash flow in terms of expenses and monthly savings potential, considering your income of ₹20 lakh, you can try to invest more. If you try to increase your SIPs to ₹60,000 every month, you will just have to increase it annually by 20%. You need to invest in more large- and mid-cap funds as the time horizon is six years. You can evaluate these four funds: UTI Nifty Index Fund, Nippon India Large Cap Fund; Parag Parikh Flexi Cap Fund, and HDFC Flexicap Fund and SBI Large & Mid Cap Fund.

Harshad Chetanwala is a co-founder at MyWealthGrowth.com