I am 31 years old , my monthly in hand is Rs 3 Lakh, I get yearly company stock of 20 lakh after tax . I have started mutual fund in 2017 and gradually increased it to 75000 per month and current accumulation is 18 Lakhs. I purchased land of 15 lakhs . I have home loan of 60 lakhs and I am paying 50000 per month .20000 monthly I save in liquid fund . 50000 yearly in NPS AND 56000 In LIC. I kept my Homeloan EMI Lesser so that I can pay without due in baad situation should I will close them by withdrawing stock money which can also grow ,is it right strategy ? What are other passive source of income I can create to have enough money by 45 age I want to

Ans: Great job on building a strong financial foundation. At 31, with a monthly in-hand salary of Rs. 3 lakhs and yearly company stock worth Rs. 20 lakhs after tax, you are doing well. Your current investments and savings show a good understanding of financial planning. Let’s dive deeper into your situation and find the best strategy to reach your goals.

Existing Investments and Savings
Mutual Funds:

Monthly SIP: Rs. 75,000
Current Corpus: Rs. 18 lakhs
Land Purchase:

Cost: Rs. 15 lakhs
Home Loan:

Principal: Rs. 60 lakhs
EMI: Rs. 50,000 per month
Liquid Fund Savings:

Monthly Contribution: Rs. 20,000
NPS:

Yearly Contribution: Rs. 50,000
LIC:

Annual Premium: Rs. 56,000
Evaluating Your Home Loan Strategy
Your decision to keep the home loan EMI manageable is smart. It ensures you can handle payments even in tough times. However, you’re considering using your stock money to close the loan. Let’s analyze this.

Pros of Paying Off the Home Loan Early
Interest Savings: You save on interest over the loan tenure.
Peace of Mind: No loan means less financial stress.
Improved Cash Flow: EMI money can be redirected to other investments.
Cons of Paying Off the Home Loan Early
Missed Investment Growth: Stocks and mutual funds can potentially offer higher returns than the interest savings from the home loan.
Liquidity Reduction: Stocks provide liquidity which is useful in emergencies.
Tax Benefits: Home loan interest offers tax deductions which you might lose.
Suggested Strategy
Instead of closing the home loan early, consider these steps:

Maintain Stock Investments: Let your stocks grow. They can potentially offer higher returns.

Increase SIP Contributions: You can increase your SIPs gradually as your income grows.

Continue Home Loan Payments: Pay the EMI comfortably and use tax benefits to your advantage.

Creating Additional Passive Income Streams
To ensure a financially secure future, it’s wise to explore other passive income options.

1. Dividend-Paying Stocks
Invest in companies that pay regular dividends. This provides an additional income stream while your capital appreciates.

2. Systematic Withdrawal Plan (SWP) in Mutual Funds
After building a substantial corpus, you can opt for an SWP. This gives you regular income while keeping your investment intact.

3. Public Provident Fund (PPF)
PPF is a safe investment with tax benefits. It’s suitable for long-term goals and provides regular income post-maturity.

4. Debt Mutual Funds
Debt funds offer regular income with relatively lower risk. They are suitable for maintaining a balanced portfolio.

5. Rental Income
If you have the means, consider buying a second property for rental income. It’s a steady source of passive income.

Financial Planning for the Future
1. Increase Your Emergency Fund
Your Rs. 20,000 monthly saving in a liquid fund is good. Ensure it covers at least 6-12 months of your expenses.

2. Review and Increase Insurance Cover
Ensure you have adequate health and life insurance. This protects your family from unforeseen events.

3. Education Fund for Kids
Start a dedicated investment for your children’s education. Consider child plans or dedicated mutual fund SIPs.

4. Retirement Planning
You are already contributing to NPS. Continue this and also consider increasing your mutual fund SIPs to build a substantial retirement corpus.

Importance of Diversification
Diversification reduces risk. Ensure your investments are spread across various asset classes like equities, debt, and liquid funds.

Monitoring and Rebalancing
Regularly monitor your portfolio. Rebalance it to maintain the desired asset allocation and optimize returns.

Final Insights
You are on the right track with your current investments and strategies. By continuing to invest wisely, maintaining liquidity, and exploring additional passive income sources, you can achieve financial freedom. Remember, consistency and regular review are key to successful financial planning.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in