Building Rs 20-Lakh Corpus In Three Years: Here's How To Plan Your Investment

Building a Rs 20-lakh corpus in just three years needs meticulous planning and financial discipline. You need to set aside a fixed amount every month to invest in multiple instruments to achieve your target. Let's understand the investment journey to accumulate Rs 20 lakh in three years.

As per an estimate, assuming an average annual return of 7%, you'd need to invest approximately Rs 50,000 per month to reach the target of Rs 20 lakh in three years.

Given the short investment horizon, prioritising capital preservation is essential. Here are some investment avenues to consider:

• Recurring Deposits: These are low-risk instruments offered by banks, providing fixed returns. While the interest rates are generally modest, they offer safety of principal.

• Mutual Funds: You can also consider investing in mutual funds. The mutual fund houses offer different schemes, such as debt, equity and hybrid plans. The equity funds come with high risk and reward, while the debt funds offer more secured return at lower interest rates. You can choose a systematic investment plan to invest as per your risk appetite, considering you have a fixed horizon of only three years.

• Fixed Deposits: Many FDs come with a three-year maturity period and offer up to 7% return. However, it may require investing a substantial amount to accumulate Rs 20 lakh in just 36 months.

If feasible, extending your investment horizon to five years can open up more opportunities for higher returns across different investment instruments. Here are a few investment options you can consider for a five-year duration or more:

• Hybrid Aggressive Funds: These funds invest in a mix of equities and debt, balancing risk and reward. Investing Rs 25,000 monthly in such funds over five years can help in achieving the desired corpus, assuming an average annual return of 12%.

• Large-Cap Equity Funds: These funds invest in well-established companies with a history of stable returns. While they come with higher risk compared to debt instruments, they offer potential for better returns over a longer horizon.

Diversification helps in mitigating risk. Combining different asset classes across debt, equity and secured investments like government bonds or FDs may help you to achieve your financial target with lesser risk.  

It's important to note that accumulating Rs 20 lakh in just three years requires preparing an investment plan and regular investments without fail. However, choosing the investment options should be based on your risk appetite and assessment of financial condition.