With property prices rising alongside the cost of living, accumulating a down payment remains a challenge for many. Experts advise aligning mutual fund investments with the investor’s time horizon to optimise outcomes.
Kshitiz Mahajan, Co-Founder of Complete Circle Consultants, recommends defining clear financial goals first. For investment horizons under three years, he suggests focusing on lower-risk instruments such as arbitrage funds, short-term debt funds, or dynamic bond funds that have limited mark-to-market risk.
For three to five years, options like multi-asset funds, balanced advantage funds, or equity savings funds may be suitable, while avoiding full equity exposure.
For periods exceeding five years, a diversified mix including flexi cap, multi cap, large cap, and mid cap funds can be considered. For goals beyond ten years, adding mid and small cap funds might be appropriate.
Tarun Birani, Founder and CEO of TBNG Capital Advisors, emphasises that portfolio construction should be driven by the investment timeline rather than market movements.
For durations of one to three years, he recommends capital preservation through liquid, arbitrage, and money market funds. For horizons over five years, equity allocation can be increased to 60–70%, primarily in blue-chip stocks to manage risk.
Both experts recommend systematic investment plans (SIPs) to promote investment discipline. Mahajan also advocates using systematic transfer plans (STPs) for deploying lump-sum amounts gradually.
Birani stresses the importance of gradual portfolio rebalancing as the goal date approaches to reduce equity exposure and lock in gains, helping protect the corpus’s purchasing power. He advises planning this strategy well in advance rather than postponing until the final payment date.
Regarding taxation, Birani notes that equity and arbitrage funds held for less than one year face a 20% tax, which reduces to 12.5% for longer holdings. Debt funds purchased after April 1, 2023, are taxed according to the investor’s income slab, with no indexation benefits.
He recommends reviewing older debt fund holdings, staggering redemptions across financial years to optimize tax liabilities, and considering mutual fund capital gains adjustments against property purchases for additional tax savings.
With a well-planned approach, mutual funds may help investors not only keep pace with inflation but also facilitate the goal of home ownership.
For the entire discussion, watch the accompanying video
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