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Repay Home Loan Early or Continue SIP? A 31-Year-Old's Dilemma

Ramalingam

Ramalingam Kalirajan  |10872 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 27, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Dec 19, 2024Hindi
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Hi sir, I am 31 years old, my monthly salary is 70 thousand. I have a existing home loan around 1986000 with ROI 9.25% for 29years. and till now through SIP I have invested 5 Lac and I keep liquid fund 2.5 Lac. My current balance including all SIP and liquid fund 9 Lac. I need a advise from you that I should repay my home with this 9 Lac or I should continue investing as SIP and continue EMI and repay homeloan as 1 or 2 EMI Extra in a year.

Ans: At 31, you have a strong financial foundation. Your disciplined SIP investments, liquid funds, and home loan management are appreciable. Let’s assess your options to help you make the best decision.

Analysing Your Current Financial Situation
Existing Home Loan
Your outstanding home loan of Rs 19.86 lakhs has a tenure of 29 years.
The interest rate is 9.25%, which impacts your long-term cash flow.
The EMI will consume a consistent portion of your salary over the years.
SIP Investments
You have already invested Rs 5 lakhs through SIPs.
Regular investments in SIPs help in wealth accumulation and compounding returns.
Your monthly SIPs are likely aligned with your financial goals.
Liquid Funds
You hold Rs 2.5 lakhs in liquid funds.
This provides a buffer for emergencies or short-term needs.
Options to Consider
Option 1: Use Rs 9 Lakhs to Prepay the Loan
Prepaying the loan can reduce the principal significantly.
This reduces the overall interest burden and loan tenure.
However, this locks your funds into a low-return liability.
Option 2: Continue SIPs and Pay Extra EMIs Annually
Continue your SIP investments for higher long-term returns.
Paying 1–2 extra EMIs yearly can reduce the tenure significantly.
This approach balances wealth creation and liability management.
Option 3: Split Funds Between Prepayment and Investments
Use a portion of Rs 9 lakhs for partial prepayment.
Invest the remaining amount in SIPs or other high-return instruments.
This ensures debt reduction and continued wealth growth.
Evaluating Return on Investment
Home Loan Interest vs SIP Returns
Your home loan interest rate of 9.25% is a guaranteed expense.
Equity SIPs typically yield higher returns, averaging 12–15% annually.
Investing in SIPs could create wealth faster than prepaying the loan.
Tax Benefits on Home Loan
You may claim tax deductions on home loan interest and principal.
Prepaying reduces the tax-saving benefits.
Recommended Approach
Maintain Emergency Liquidity
Retain Rs 2.5 lakhs or more in liquid funds.
This ensures financial stability during unforeseen situations.
Focus on SIP Investments
Continue SIPs to benefit from long-term compounding.
Increase your SIP contributions gradually with salary increments.
Make Partial Prepayments
Use a portion of Rs 9 lakhs for partial prepayment.
Aim to reduce the principal significantly to lower interest outflows.
Pay Extra EMIs
Commit to paying at least 2 extra EMIs annually.
This reduces your loan tenure and interest burden effectively.
Avoid Common Pitfalls
Do Not Over-Allocate to Loan Prepayment
Avoid locking all your funds into loan repayment.
This limits your liquidity and investment potential.
Avoid Real Estate Investments
Real estate involves high costs, illiquidity, and uncertain returns.
Stick to diversified mutual funds or equity investments instead.
Maintain Disciplined Financial Planning
Ensure a balanced approach between debt reduction and wealth creation.
Review your financial goals annually for necessary adjustments.
Final Insights
Your financial journey is off to a great start. Continue with SIP investments to maximise long-term growth. Use surplus funds for partial loan prepayments and extra EMIs to manage your debt efficiently. Balancing both strategies will ensure a secure financial future and help you achieve your goals effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |10872 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 24, 2024

Asked by Anonymous - May 24, 2024Hindi
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Hi Sir, I am Vitthal 39 Year old I have a monthly in hand salary of 67,000 INR. I have a Home Loan outstanding of Rs 27,00,000 and EMI on That Rs 24000 Rate of 9.15%, other expenses for 20,000. I Invest MF SIP 3000/Month, PPF 1000/month , NPS 30000/Yearly from Last Two years . Rest of above my monthly saving is rs 15 to 17K. Please advice Should i repay Home Loan or invest in MF SIP ?
Ans: Understanding Your Financial Situation
Hi Vitthal,

It's great to see your proactive approach towards financial planning. Managing a monthly salary of Rs 67,000 with various commitments shows your dedication. You have a home loan with a significant EMI, and you're investing in mutual funds (MF) through SIP, PPF, and NPS. Your savings of Rs 15,000 to 17,000 each month show good financial discipline.

Evaluating Loan Repayment Versus Investment
You face a common dilemma: should you repay your home loan faster or invest in mutual funds? Both options have their merits and understanding these will help you make an informed decision.

Home Loan Repayment: Pros and Cons
Pros of Repaying Home Loan
Reduced Interest Burden: Prepaying your loan reduces the total interest paid over time. This can be a significant saving.

Debt-Free Living: Being debt-free provides peace of mind and financial freedom. It reduces monthly financial commitments.

Guaranteed Returns: The interest saved by prepaying is a guaranteed return equivalent to your loan interest rate (9.15%).

Cons of Repaying Home Loan
Liquidity Crunch: Using excess savings to repay the loan may reduce your liquidity. Having cash available for emergencies is crucial.

Opportunity Cost: The potential returns from investments could be higher than the interest saved on loan repayment.

Investing in Mutual Funds: Pros and Cons
Pros of Investing in Mutual Funds
Potential Higher Returns: Mutual funds, especially actively managed ones, can offer higher returns compared to the interest rate on your home loan.

Compounding Effect: Long-term investments benefit from compounding, enhancing your wealth significantly over time.

Tax Benefits: Certain mutual funds provide tax benefits under Section 80C, optimizing your tax liability.

Cons of Investing in Mutual Funds
Market Risk: Mutual funds are subject to market risks. The returns are not guaranteed and can fluctuate based on market conditions.

Short-Term Volatility: Investments can be volatile in the short term, which might be concerning if you need funds urgently.

Detailed Analysis and Recommendation
Considering your scenario, let's weigh these options more analytically.

Loan Interest vs Investment Returns
Your home loan has an interest rate of 9.15%. To justify investing rather than repaying the loan, your investments should ideally yield higher than 9.15%. Actively managed mutual funds have historically provided returns that can potentially exceed this threshold. However, they come with risks.

Financial Goals and Risk Tolerance
Risk Appetite: Assess your risk tolerance. If you prefer stability and lower risk, prepaying the loan might suit you better. If you can handle market fluctuations, investing might be more beneficial.

Financial Goals: Define your financial goals. If you aim for wealth creation, investments can offer higher growth. If your priority is debt freedom, loan prepayment is better.

Liquidity and Emergency Funds
Maintaining liquidity is essential. Ensure you have an emergency fund covering at least 6 months of expenses. This ensures financial stability in unforeseen circumstances.

Structured Approach
Balanced Strategy: You could adopt a balanced strategy by allocating a portion of your savings towards prepayment and another portion towards investments. This balances debt reduction and wealth creation.

Regular Fund Investments: Investing in regular funds through a Certified Financial Planner (CFP) ensures professional management and guidance. They can help navigate market complexities and maximize returns.

Conclusion
Your financial health is commendable, and your savings discipline is impressive. A balanced approach, considering your risk tolerance and financial goals, is key. Whether you lean towards loan repayment or investment, ensure you maintain liquidity and have a clear strategy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |10872 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 28, 2024

Money
Hi Sir, I am Vitthal 39 Year old I have a monthly in hand salary of 67,000 INR. I have a Home Loan outstanding of Rs 25,00,000 and EMI on That Rs 24000 Rate of 9.15%, other expenses for 20,000. I Invest MF SIP 3000/Month, PPF 1000/month , NPS 30000/Yearly from Last Two years . Rest of above my monthly saving is rs 15 to 17K. Please advice Should i repay Home Loan or invest in MF SIP ?
Ans: Your financial planning and savings strategy is noteworthy. You have managed to balance investments, expenses, and home loan repayments effectively. A Rs 15,000-17,000 surplus after expenses, despite existing commitments, reflects disciplined financial habits.

Let us evaluate whether it is better to repay your home loan or increase SIP investments. This analysis will focus on long-term financial benefits and risk management.

Key Considerations for Decision-Making
1. Home Loan Analysis
Interest Rate Impact: Your home loan has a 9.15% interest rate. This is moderately high compared to historical averages for home loans. The effective cost of the loan after considering tax benefits under Section 24(b) can be slightly lower, especially if you're in the 20% or 30% tax bracket.

EMI and Liquidity: Your Rs 24,000 EMI is manageable, given your Rs 67,000 monthly income. However, prepaying the loan reduces future interest payments, providing risk-free savings.

Tenure and Interest Outflow: If you prepay, the loan tenure reduces, leading to significant interest savings. Prepayment offers a guaranteed return equivalent to the loan interest rate, adjusted for tax benefits.

2. SIP Investments
Higher Returns Potential: Equity mutual funds typically deliver higher returns (10-12%) over the long term. This can outperform the cost of your loan, even after factoring in taxation on capital gains.

Market Risks: SIPs in equity mutual funds involve market risks. Short-term volatility may impact returns, but long-term investments generally stabilize and grow wealth.

Flexibility and Growth: SIPs allow compounding of returns and disciplined investing. Continuing SIPs ensures you take advantage of market ups and downs for rupee cost averaging.

Comparison: Prepay vs Invest
Advantages of Prepaying the Home Loan
Guaranteed savings on interest payments.
Reduction in financial liability.
Increased peace of mind with lower debt.
Advantages of Investing in SIPs
Higher wealth creation over the long term.
Greater liquidity compared to prepaying a loan.
Helps in building a diversified investment portfolio.
Tax Implications
Home Loan: The interest component qualifies for deductions up to Rs 2 lakh under Section 24(b). This effectively reduces the net cost of the loan, depending on your tax slab.

Mutual Funds: Long-term capital gains (LTCG) on equity mutual funds above Rs 1.25 lakh are taxed at 12.5%. Short-term gains are taxed at 20%. Debt fund gains are taxed as per your income tax slab.

Comparing the post-tax cost of your loan and post-tax returns on investments helps make a balanced decision.

Strategic Approach: A Balanced Plan
Instead of focusing on just one option, consider splitting your surplus between prepaying the loan and investing in SIPs. Here’s how:

1. Continue Existing SIPs and Investments
Your Rs 3,000 SIP, Rs 1,000 PPF, and Rs 30,000 yearly NPS investments are excellent.
These create a diversified portfolio for long-term goals and retirement planning.
2. Allocate Surplus Wisely
Use Rs 10,000-12,000 from your monthly savings to prepay the home loan. This helps reduce interest outflow significantly over time.
Direct the remaining Rs 5,000-7,000 to increase SIPs in equity mutual funds. This ensures you benefit from market growth.
3. Emergency Fund
Maintain at least six months' worth of expenses, including EMI, in a liquid fund or savings account. This ensures you can handle emergencies without financial stress.
4. Tax Planning
Claim maximum deductions available on the home loan.
Evaluate LTCG tax implications when redeeming mutual fund investments in the future.
Benefits of a Balanced Plan
Reduces debt gradually while maintaining liquidity.
Balances risk between fixed returns (loan repayment) and market returns (SIP investments).
Builds a safety net for emergencies while growing wealth.
Points to Monitor Regularly
1. Interest Rate Trends
Keep an eye on your home loan interest rate. If rates rise, consider increasing prepayment amounts.
2. Investment Performance
Periodically review your mutual fund portfolio. Ensure funds align with your goals and risk profile.
3. Tax Changes
Stay updated on tax rules for home loans and investments. This can influence the financial benefits of each option.
4. Financial Goals
Assess your financial goals every year. Adjust investments and repayment strategies accordingly.
Final Insights
Your current financial strategy reflects strong discipline and foresight. By balancing home loan prepayments with increased SIP investments, you can enjoy the best of both worlds—reduced debt burden and wealth creation.

This approach ensures you are financially secure while building a robust portfolio for future goals. Keep monitoring your financial health and make adjustments as needed.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Nayagam P

Nayagam P P  |10852 Answers  |Ask -

Career Counsellor - Answered on Dec 07, 2025

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Hello, I’m a student who recently joined the Integrated M.Sc Physics program at Amrita University. I’m aiming for a strong academic foundation and a clear career path. Could you please guide me on the following: How good is this course for research careers or higher studies (IISc, IITs, abroad)? What are the placement prospects after Integrated M.Sc Physics at Amrita? Does the program help in preparing for alternate options like UPSC, CDS/AFCAT, or technical roles? What skills (coding, research projects, certifications) should I start early to make the most of this degree?
Ans: Sree, Program Overview and Academic Foundation: Congratulations on joining the Integrated M.Sc Physics program at Amrita University. This five-year integrated program represents a rigorous pathway designed to equip you with advanced theoretical and experimental physics knowledge combined with cutting-edge scientific computing skills. The curriculum uniquely integrates a minor in Scientific Computing, which adds substantial computational capability to your profile—a critical advantage in today's research and professional landscape. The program incorporates comprehensive coursework spanning classical mechanics, electromagnetism, quantum mechanics, statistical physics, advanced laboratory work, and specialized topics in materials physics, optoelectronics, and computational methods, positioning you excellently for both research and professional careers.
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An M.Sc from Amrita facilitates admission to PhD programs at international institutions. German universities offer tuition-free or low-fee MSc Physics programs (2 years) with scholarships like DAAD providing €850+ monthly stipends. US universities accept M.Sc graduates directly for PhD positions with full funding (tuition coverage + stipend). These pathways require GRE scores and strong Statement of Purpose articulating research interests. Research collaboration opportunities exist with Max Planck Institute (Germany) and CalTech Summer Research Program (USA), both welcoming Indian M.Sc students.
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Asked on - Dec 07, 2025 | Answered on Dec 07, 2025
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Ramalingam

Ramalingam Kalirajan  |10872 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 06, 2025

Asked by Anonymous - Dec 06, 2025Hindi
Money
Dear Sir/Ma'am, I need some guidance and advice for continuing my mutual fund investments. I am a 36 year old male, married, no kids yet and no debts/liabilities as such. I have couple of savings in PPF, NPS, Emergency funds and long term investing in direct stocks. I recently started below mentioned SIPs for long term to grow wealth. Request you to review the same and let me know if I should continue with the SIPs or need to rationalize. Kindly also advice on how to invest a lumpsum amount of around 6lacs. invesco small cap 2000 motilal oswal midcap 2700 parag parikh flexicap 3000 HDFC flexicap 3100 ICICI prudential largecap 3100 HDFC large and midcap 3100 HDFC gold etf FOF 2000 ICICI Pru equity and debt fund 3000 HDFC balanced advantage fund 3000 nippon india silver etf FOF 2000
Ans: You already built a solid foundation. Many investors delay planning. But you started early at 36. That gives you a strong advantage. You have no liabilities. You have long term thinking. You also have diversified savings like PPF, NPS, Emergency funds and direct stocks. That shows clarity and discipline. This approach builds wealth with less stress over time.

You also started systematic investments in equity funds. That is a positive step. Your selection covers multiple categories like large cap, mid cap, small cap, flexi cap, hybrid and precious metals. So the intent is right. You are trying to create a broad portfolio. That gives balance.

» Your Portfolio Composition Understanding
Your current SIP list includes:

Small cap

Mid cap

Flexi cap

Large cap

Large and mid cap

Hybrid category

Gold and Silver FoF

Equity and Debt allocation fund

Dynamic hybrid fund

This shows you are trying to cover many segments. But too many categories can create overlap. When there is overlap, you get confusion during review. It also makes portfolio discipline difficult. You may think you are diversified. But the holdings inside may repeat. That reduces efficiency.

Your portfolio now looks like:

Equity dominant

Hybrid for stability

Metals for hedge

So the broad direction is fine. But simplifying helps in long-term habit building.

» Fund Category Duplication
You hold:

Two flexi cap funds

One large and mid cap fund

One pure large cap fund

One mid cap fund

One small cap fund

Flexi cap funds already invest across large, mid, small. Then large and mid also overlaps. So the large cap exposure gets repeated. That may not add extra benefit. But it increases monitoring complexity.

So I suggest rationalising. Keep one fund per category in core. Keep satellite space for only high conviction.

» Core and Satellite Strategy
A structured portfolio follows core and satellite method.

Core portfolio should be:

Simple

Long term

Stable

Satellite portfolio can be:

High growth

Concentrated

Based on your thinking level, you can structure like this:

Core funds:

One large cap

One flexi cap

One hybrid equity and debt fund

One balanced advantage type fund

Satellite funds:

One mid cap

One small cap

One metal allocation if needed

This division gives clarity. You can continue SIPs with review every year. No need to stop and restart often. That reduces behavioural mistakes.

» Your Current SIP List Review with Suggested Streamlining

You can consider continuing:

One flexi cap

One large cap

One mid cap

One small cap

One balanced advantage

One equity and debt hybrid

You may reconsider keeping both flexi caps and both gold silver funds. One of each category is enough. Because too many funds do not increase returns. It complicates tracking.

Precious metal funds should not be more than 5 to 7 percent in your portfolio. This is because metals are hedge assets. They do not create compounding like equity. They act as protection during cycles. So keep them small.

» How to Use the Rs 6 Lakh Lump Sum
You asked about lump sum investing. This is important. Lump sum should not go fully into equity at one time. Markets move in cycles. So use a staggered method. You can invest the lump sum through STP (Systematic Transfer Plan). You can keep the amount in a liquid fund and set STP toward your chosen growth funds over 6 to 12 months.

This reduces timing risk. It also creates discipline. So your Rs 6 lakh can be deployed gradually. You may use 50% towards core equity funds and 30% toward satellite growth category. The remaining 20% can go into hybrid category. This gives balance and comfort.

» Regular Funds Over Direct Funds
One important point many investors miss. Direct funds look cheaper. But they demand deep knowledge, discipline, and behaviour control. Most investors lose more through emotional selling and wrong timing than they save on expense ratio.

With regular funds through a Mutual Fund Distributor with Certified Financial Planner qualification, you get guidance, structure and correction. The advisory discipline protects you during market extremes. That is more valuable than a small saving in expense ratio.

A personalised planner also tracks portfolio drift, rebalancing need and category shifts. So regular fund investing gives long-term benefit and behaviour coaching.

» Actively Managed Funds over Index or ETF
Some investors choose index funds or ETF thinking they are simple and cheap. But they ignore drawbacks.

Index funds or ETF will not avoid weak companies in the index. They will invest whether the company grows or struggles. There is no fund manager decision making. So when markets are at peak, index funds continue aggressive exposure. In downturns also they fall fully. There is no cushion.

Actively managed funds work with research teams. They can avoid bad sectors. They can shift allocation based on market and economy. Over long term, this gives better alpha and stability. So continuing with actively managed funds creates better wealth compounding.

» SIP Continuation Strategy
Once the rationalisation is done, continue SIPs every month without interruption. Pause and restart behaviour damages compounding power. SIP works best when you go through all market cycles. You benefit more during corrections because cost averaging works.

So continue SIP amount. You can also review SIP increase every year based on income. Increasing SIP by 10 to 15 percent every year helps you reach large corpus faster.

» Asset Allocation Based Approach
One key point in wealth creation is having the right asset mix. Equity gives growth. Hybrid gives balance. Metals give hedge. Debt gives safety. Your asset allocation should stay aligned to your risk profile and time horizon.

Since you are young and have long term horizon, higher equity allocation is fine. But as time moves, rebalancing is important. Rebalancing protects gains and restores allocation.

So review your asset allocation every year or during major life events like child birth, home buying or retirement planning.

» Behaviour Management
Many portfolios fail not due to bad funds. They fail due to bad decisions. Selling during correction. Stopping SIP when market falls. Chasing past return performance. These mistakes reduce wealth.

Your discipline so far is good. Continue to stay patient during volatility. Equity rewards patience and time.

» Financial Goals Clarity
Since you have no children now, you can decide your long-term goals. Typical goals may include:

Retirement

Future child education

Dream lifestyle purchase

Health care reserves

When goals are clear, investment purpose becomes stronger. So you can map each fund category to goal horizon. Short-term goals should not use equity. Long-term goals should use equity with hybrid support.

» Role of Review and Monitoring
Review once in a year is enough. Frequent review can create anxiety. Annual review helps check:

Fund performance

Expense drift

Category relevance

Allocation balance

Then adjust only if needed. This progress helps you stay confident and aligned.

» Taxation Awareness
Equity mutual funds taxation rules are:

Short term (below one year holding) taxable at 20 percent

Long term (above one year holding) gains above Rs 1.25 lakh taxable at 12.5 percent

Debt mutual funds are taxed as per your income slab.

So always hold equity funds for long term. That reduces tax impact and gives better growth.

» SIP Increase Plan
You can create a simple plan to increase SIP over time. For example:

Increase SIP at every salary increment

Increase SIP during bonus time

Use rewards or extra income for investing

This habit accelerates wealth. So by the time you reach 45 to 50 years, your investments could reach a strong level.

» Insurance and Protection
Before investing large, ensure you have term insurance and health insurance. If not already done, it is important. Insurance protects wealth. Without insurance, even a small medical event can impact investment plan. So review this part also. Since you are married, cover both.

» Wealth Behaviour Mindset
You are already disciplined. Just keep these simple principles:

Invest without stopping

Review once a year

Avoid funds overlap

Follow asset allocation

Avoid reacting to media noise

This helps you reach long term milestones.

» Finally
You are on the right track. Only fine tuning and simplification is needed. Your discipline is visible. Your portfolio will grow well with structure, patience and periodic review. Use the Rs 6 lakh with STP approach. And continue SIP with rationalised categories.

With time and consistency, wealth creation becomes effortless and peaceful. You just need to stay committed and avoid overthinking during market movements.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

...Read more

Dr Dipankar

Dr Dipankar Dutta  |1837 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Dec 05, 2025

Career
Dear Sir, I did my BTech from a normal engineering college not very famous. The teaching was not great and hence i did not study well. I tried my best to learn coding including all the technologies like html,css,javascript,react js,dba,php because i wanted to be a web developer But nothing seem to enter my head except html and css. I don't understand a language which has more complexities. Is it because of my lack of experience or not devoting enough time. I am not sure. I did many courses online and tried to do diplomas also abroad which i passed somehow. I recently joined android development course because i like apps but the teaching was so fast that i could not memorize anything. There was no time to even take notes down. During the course i did assignments and understood the code because i have to pass but after the course is over i tend to forget everything. I attempted a lot of interviews. Some of them i even got but could not perform well so they let me go. Now due to the AI booming and job markets in a bad shape i am re-thinking whether to keep studying or whether its just time waste. Since 3 years i am doing labour type of jobs which does not yield anything to me for survival and to pay my expenses. I have the quest to learn everything but as soon as i sit in front of the computer i listen to music or read something else. What should i do to stay more focused? What should i do to make myself believe confident. Is there still scope of IT in todays world? Kindly advise.
Ans: Your story does not show failure.
It shows persistence, effort, and desire to improve.

Most people give up.
You didn’t.
That means you will succeed — but with the right method, not the old one.

...Read more

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