If you wish to buy your dream house in your 50s, it’s a good idea to start saving now. The more time you give yourself to invest for your goal, the larger the corpus you can expect to build. That being said, here are a few investment tips to build a financial plan for the purchase of your dream home.
Research on the Home You Want to Buy
Consider researching the following things about your dream house:
- Do you wish the house to be located in the heart or outskirts of a city?
- Are you looking for a condo, an independent house or an apartment?
- What amenities are you looking for (parking area, gym, swimming pool, etc.)?
- How many bedrooms do you need?
The cost of a house is determined by all these factors. Therefore, consider them all to figure out how much you need to save to buy the house.
Factor in Inflation
When you try to evaluate the cost of your dream home, don’t forget to consider the effect of inflation as well. Inflation reduces our purchasing power. Therefore, with rising inflation, it’s important to increase your savings to meet the set financial goal.
Consider the number of years after which you wish to purchase a house. Then research the expected rates of inflation in those coming years. Make an average of the rates and add it to the estimated cost of the house. This is the rough amount that you need to save.
Consider Investing and Not Just Saving
Compare various investment schemes from a reputed insurance company and choose what suits you the most. Some of the best investment plans are unit-linked insurance plans (ULIP) and mutual funds. A ULIP policy is composed of life insurance and investment components. Under the latter component, you can invest in a portfolio of equity and debt securities in a suitable proportion based on your risk appetite and investment horizon. The same holds for building the portfolio of a mutual fund.
If you have a moderate-to-high risk tolerance and a medium-to-long time horizon, you can invest more in equities and less in debt instruments. This is also a good idea if you wish to build a substantial corpus to buy a house. That’s because equities hold the potential to deliver high returns over the long term by averaging out short-term market fluctuations.
Invest in a Disciplined Way
If you invest in a mutual fund, you can choose the best systematic investment plan (SIP). That way, you can invest a small fixed amount in a disciplined manner at regular intervals (monthly, quarterly, half-yearly, etc.) in the chosen scheme. This can help you grow your savings manifold with the power of compounding. Plus you can buy fewer units of the fund when prices rise and more units when prices fall. This can reduce the average cost of your investment.
Opt for a suitable investment scheme and start putting money in it early to generate considerable wealth to finance your dream home. Ensure to remain invested for the whole time horizon to beat short-term market ups and downs.