I am 36 years old and my current in hand salary is around 1.7 lacs per month alongwith some 10% variable pay, I have currently two ongoing home loans, one with SBI for some 24.5 lacs remaining with 25k per month EMI for 25 years, for the home I am currently residing, and another home loan is with HDFC for 14 lacs with 12.5k per month EMI for 20 years, for a 2 BHK flat in an under construction affordable housing project, which I will let out once completed by 2026. Besides this I have around 15 lacs in FD, 1.33 lacs invested in Gold ETF, 5.5 lacs in mutual funds (monthly SIP 23k), 1.5 lacs in PPF, monthly 12k invested in NPS, and every month I target to pay around 15k to pre pay my HDFC home loan, next I would target the SBI home loan similarly. Just wanted to know if my current approach seems ok or do I need to make some changes to my current portfolio like divert funds to close home loan and then target investments?

Ans: It's great that you and your wife are thinking ahead and planning for your future. Let's dive into your current investment strategy and how you can tweak it if you decide to take on a home loan. Your current investments are impressive, but there's always room for improvement.

Assessing Your Current Investment Strategy
Mutual Funds and SIPs
You invest Rs 1 lakh monthly in diversified funds via SIPs. This is a solid strategy as it allows you to invest regularly and benefit from rupee cost averaging. SIPs are great for disciplined investing and mitigating market volatility.

Mutual funds are excellent for growth and diversification. With Rs 50 lakhs already in mutual funds, you have a substantial portfolio. Diversification reduces risk and enhances returns. However, it's crucial to periodically review and rebalance your portfolio to align with your goals and market conditions.

Recurring Deposits (RDs)
Investing Rs 20k monthly in RDs is a good move for stability. RDs provide guaranteed returns and are a safe investment. However, the returns are relatively low compared to other options. You might want to consider reducing your RD investments and redirecting some funds into more growth-oriented investments.

Fixed Deposits (FDs)
You have Rs 25 lakhs in FDs. FDs are safe but offer lower returns compared to mutual funds. It's wise to have some amount in FDs for emergency liquidity, but having too much can limit your growth potential. Consider maintaining a balance between safety and growth.

National Pension System (NPS) and Provident Fund (PPF)
You contribute Rs 50k annually to NPS and Rs 1 lakh to PPF. Both are excellent for long-term retirement savings. NPS offers market-linked returns and PPF provides guaranteed returns with tax benefits. Your employer’s contribution to NPS and EPF adds to your retirement corpus, which is great.

Genuine Compliments
You're doing an impressive job with your investments. Investing regularly through SIPs and maintaining a diversified portfolio is commendable. Planning for retirement with NPS and PPF shows your foresight. Keep up the good work!

Suggested Changes in Current Strategy
Portfolio Review and Rebalancing
Regularly review your mutual fund portfolio. Assess the performance and make changes if needed. Focus on a mix of large-cap, mid-cap, and small-cap funds. Reduce the number of funds if you have too many, to avoid over-diversification.

Increasing Equity Exposure
Consider increasing your equity exposure for higher growth. Redirect some of your RD and FD investments to mutual funds. This will enhance your portfolio’s growth potential over the long term.

Emergency Fund
Ensure you have an emergency fund covering 6-12 months of expenses. This provides a safety net and prevents you from dipping into your investments during emergencies.

Preparing for a Home Loan
Impact on Monthly Investments
An EMI of Rs 80k will significantly impact your monthly cash flow. Here’s how you can adjust your investments:

Reducing SIP Amounts
You may need to reduce your SIP investments. Prioritize your essential SIPs and consider reducing contributions to less critical ones. This helps in managing your cash flow without stopping investments entirely.

Prioritizing High-Growth Investments
Focus on high-growth investments to maximize returns. Consider reducing contributions to RDs and FDs, as they offer lower returns. Redirect these funds to mutual funds with better growth potential.

Budgeting and Expense Management
Create a detailed budget to manage your expenses. Identify areas where you can cut back to free up funds for your EMI. This helps in maintaining a balance between investing and meeting your financial obligations.

Advantages of Mutual Funds
Professional Management
Mutual funds are managed by experts who make informed decisions. They analyze markets and select the best securities for the fund.

Diversification
Mutual funds offer diversification, reducing risk by investing in a variety of securities. This helps in balancing risk and return.

Liquidity
Mutual funds are relatively liquid. You can redeem your investment whenever needed, providing flexibility.

Systematic Investment Plan (SIP)
SIPs help in disciplined investing. They allow you to invest regularly, reducing the impact of market volatility.

Power of Compounding
Investing in mutual funds benefits from the power of compounding. Reinvesting returns helps your investment grow exponentially over time.

Disadvantages of Index Funds
Limited Flexibility
Index funds strictly follow the index, offering no flexibility. They can't adapt to market changes.

Average Returns
Index funds aim to match the index returns, which are average. Actively managed funds aim to outperform the index.

Benefits of Actively Managed Funds
Potential to Outperform
Actively managed funds aim to outperform the index. Fund managers make strategic decisions to maximize returns.

Flexibility
Fund managers can adapt to market conditions. They can select or avoid securities based on market trends.

Final Insights
You have a strong investment strategy and a clear vision for your future. With a few adjustments, you can enhance your returns and achieve your goals. Consider reviewing your mutual fund portfolio, increasing equity exposure, and maintaining an emergency fund.

If you decide to take on a home loan, adjust your investments to manage the EMI without compromising your financial goals. Prioritize high-growth investments and create a detailed budget to manage your expenses.

Keep up the disciplined investing approach and regularly review your portfolio. This ensures your investments are aligned with your goals and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: At 32, you have made a good foundation.

Let us now give a deep and full review.

We will look at each area one by one.

You will get full insights with clarity.

We aim to help you build a stable, long-term financial future.

Your Monthly Income and Loan Situation

You earn Rs. 1.06 lakh in hand monthly.

Your home loan EMI is Rs. 27,670.

You pay Rs. 30,000 monthly, which is good.

Loan balance is Rs. 28.5 lakh.

Interest is 8.2%, which is moderate.

Loan term is 20 years, but you want to close in 12 years.

That is a good goal and achievable.

For that, you need more prepayments.

But not at the cost of long-term wealth building.

Home Loan Strategy Assessment

Continue Rs. 30,000 monthly for now.

Try to increase by Rs. 5,000 every year.

Make one-time part payments when you get bonus.

Use only part of your bonus.

Keep the rest for investments.

Do not withdraw mutual funds for prepayment.

Do not break PPF for home loan either.

Let compounding work for long-term investments.

Review loan rate every year.

If it rises above 9%, consider balance transfer.

Mutual Funds Portfolio – Evaluation

Rs. 18.5 lakh in mutual funds is a good start.

But asset allocation and fund selection matter.

Are you in direct plans? If yes, please rethink.

Direct funds look cheap but lack guidance.

They don’t offer proper handholding or rebalancing.

Regular funds with a trusted MFD and CFP give better outcomes.

They guide during market ups and downs.

Direct fund investors often make emotional exits.

Actively managed funds outperform passive ones in India.

Index funds miss midcap and smallcap exposure.

Active funds also handle volatility better.

Continue SIPs, but align with long-term goals.

Do not pick funds based on past return alone.

Evaluate portfolio with a CFP once a year.

PPF and EPF – Long-Term Foundation

Rs. 8.5 lakh in PPF is a strong base.

Keep contributing yearly to get full benefit.

PPF helps with tax-free retirement corpus.

It also protects your money from market risk.

Your EPF of Rs. 3.4 lakh is also growing.

Do not withdraw EPF unless absolutely urgent.

Treat PPF and EPF as separate retirement basket.

Equity Stocks – Evaluation Needed

Rs. 2.25 lakh in equity stocks is okay for now.

Don’t invest more in stocks directly now.

Stocks need time and deep understanding.

They also need full monitoring.

Most investors make losses due to emotional buying and selling.

Use mutual funds for equity exposure instead.

Gold Investment – Assessment

Rs. 15,000 in gold is a small part.

That is good.

Keep gold below 10% of your total assets.

Use gold more as protection, not growth.

Avoid jewellery for investment purpose.

Prefer digital gold or sovereign gold bonds.

Sukanya Samriddhi Yojana (SSY) for Daughter

You have Rs. 30,000 in SSY. Very thoughtful.

This is a great start for her future.

Continue contributing yearly for 15 years.

SSY gives high interest and tax-free maturity.

It also teaches you discipline in saving.

Insurance – Current Protection Review

Rs. 5 lakh health cover is basic, not strong.

Please increase it to Rs. 10 lakh.

Add super top-up plan for better protection.

Rs. 16,000 annual premium is reasonable.

Rs. 50 lakh term cover is slightly low.

At 32, increase to Rs. 1 crore now.

Premium will still be affordable at this age.

Check nominee and coverage details regularly.

You must secure family before anything else.

Pension Plan – Needs Clarity

You pay Rs. 4,000 monthly into a pension plan.

You said it is market linked.

Is this a ULIP or insurance pension plan?

If yes, check if return is below mutual funds.

ULIPs and endowment plans are not efficient.

If surrender is possible, exit now.

Reinvest into good mutual funds for retirement.

You will build more wealth in long term.

Always separate insurance and investment.

Expenses and Savings Rate – Important Area

EMI is about 28% of your take-home pay.

This is manageable for now.

Keep total EMI + SIPs under 50% of salary.

You need to raise investments over the next 3 years.

Start with at least 20% monthly investment today.

As your income rises, increase it to 35%.

Include SIPs, PPF, SSY, EPF in that number.

Make investments automatic and regular.

Emergency Fund – Missing Piece

You haven’t mentioned emergency fund.

This is very important.

Keep 6 months of expenses as liquid savings.

It can be in savings account or liquid fund.

Use only for medical or job-related emergency.

This will prevent loan or credit card borrowing.

Children’s Education and Future Planning

Your daughter is 1.5 years old now.

You have started SSY. That is good.

But you need more for higher education.

Add mutual fund SIPs for her education goal.

Start small. Even Rs. 3,000 monthly helps.

Increase it every year.

Combine SSY + mutual funds to reach her need.

Retirement Planning – Start Now

Retirement is still far, but start early.

Relying only on EPF and PPF won’t be enough.

Pension plan mentioned may underperform.

You need dedicated retirement mutual funds.

These must be handled by MFD and CFP support.

Do not use direct funds.

Retirement planning is a serious long-term goal.

Start with Rs. 5,000 monthly now.

Review once every year.

Tax Planning – Do Not Over-Invest Just for Tax

Don’t buy insurance to save tax.

ELSS mutual funds offer better growth.

PPF, EPF, SSY already give tax benefits.

That’s enough for now.

Try to make tax planning and wealth building go together.

Checklist for Action Plan – Your Next Steps

Increase health cover to Rs. 10 lakh with top-up.

Increase term insurance to Rs. 1 crore.

Build emergency fund of Rs. 2 lakh minimum.

Don’t increase equity stocks now.

Exit pension plan if it is ULIP or traditional plan.

Continue SSY yearly for daughter.

Start SIP for her higher education.

Reassess mutual fund mix and switch to regular plans.

Start a separate SIP for retirement.

Don’t use PPF or MF for home loan prepayment.

Increase home loan EMI only if surplus grows.

Review loan interest and balance transfer yearly.

Finally

You are on the right track overall.

Your income is good. Your loan is manageable.

Your investments are growing.

Now you need better structure and clear goals.

Don’t mix investment, insurance, and debt.

Work with a trusted MFD guided by a CFP.

That will help you grow with confidence.

Think long term, act every month, and stay consistent.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

Ans: Hi,

As you yourself said that your portfolio is more on the real estate side, and now you want to build your liquid portfolio in the form of stocks and MFs. You want to earn 2 lakh monthly pension after 58 and want to save 1 crore for kids' higher education. It is possible through right investment.

- Currently your real estate fetches you a monthly rental of 95,000. It is very good. But you are also paying EMI for 80 lakhs loan and home loan. This rent can be directed towards paying EMI directly so that your salary is used solely for the purpose of other goals.
- You are almost saving and investing almost 50% of your salary in various assets like MF, stocks, etf, ssy etc. Diversification is on a good side.
- SSY is good for girl child. Can continue doing the same.
- NPS and PPF are good to go. Continue with this.
- Postal recurring is of less use to you. Can stop or surrender the same based on for how long you have been investing.
- LIC plan - usually return generated by these are only 4-5% over long run; way less than a simple FD. Can redirect these investments into NPS.
- Gold & Silver ETF - 10k monthly is a good start. Keep doing this.
- If you have good knowledge about stock market and have proper time to do research and invest - continue with current investment of 40k per month into stocks. But if you are not doing this research by yourself, then you can redirect new investments to your stocks portfolio into mutual funds.
- By continuing your current contribution to MFs (and increasing it by stocks contribution) - if you invest 1 lakh monthly with an annual step-up of 10%, you will generate a total corpus of 15 crore by the time you turn 58.
This along with your PPF, EPF and NPS will give you a comfortable retirement forever and a big inheritence to your children.
- For kids higher education, set aside 75000 monthly starting now to fulfil this requirement.

As your corpus size if more than 10 lakhs, you should get the help of a professional advisor.
Hence do consult a professional Certified Financial Planner - a CFP who can guide you with exact funds to invest in keeping in mind your age, financial goals and risk profile.

Best Regards,
Reetika Sharma, Certified Financial Planner
https://www.instagram.com/cfpreetika/