Investing vs. Buying a Home: What Should I Do?

Hi! I am 37 Yrs old entrepreneur having a net worth of 4 Cr invested fully in Equity and Debt. I have a 3 Yrs old daughter and living with my wife, sister and parents in Bengaluru. My wife and parents wants me to purchase home rather than staying invested fully in paper money. On the other hand, I'm looking to achieve financial freedom asap so that I can take more risks professionally. Given the rising costs of real estate and unjustified valuations, I am unable to decide whether to take out half of the capital and purchase home or stay invested fully while living on rent. As we're 6 members in the family, I need at least 2.5 Cr worth of house. Given my nature of job (risk), I don't want to take burden of heavy EMI currently. Please help me out deciding.

Ans: Your parents and wife are absolutely correct. Don't get carried away by social media chitchat. If you don't want to take a home loan, utilize your corpus of 4 Cr to buy that home(~2.5 Cr). Make up your mind. Then you can negotiate and come to common understanding with the developer.

Don't think that your asset base is decreasing but rather as transfer from "paper money" into "real asset", I mean real estate.

You can keep investing regularly over next 10-12 years to rebuild the corpus.

Not all startups are bootstrapped.

If you have a sound business proposition, VCs will finance you.

You may explore option of spouse working while you decide to enter into business with calculated risks so as to have stable income.

As you grow older the risk of lifestyle diseases kick in and at that stage you don't want to end up in a situation where you are unable to pay escalating rents on time.

Ans: You deserve appreciation for your clear planning and thoughtful approach. Buying a house is an emotional and financial milestone. You have handled the decision with maturity. Many people rush into buying without evaluating long-term impact, but you are thinking in a structured way. That itself shows financial awareness. Let us now look at your plan from all sides before taking the final decision.

» Understanding your current financial situation

You and your spouse earn around Rs 3.6 lakhs per month together. Your rent is Rs 30,000, and you have an ongoing car loan of Rs 5 lakhs with an EMI of Rs 16,000. You are considering buying an apartment costing around Rs 1.1 crore.

You plan to pay Rs 60 lakhs upfront and take a Rs 50 lakh home loan. Your age is 36, and your wife’s age is 32. You have a young son who will enter Grade 1 next year. These details are important because your financial decisions should protect both long-term security and near-term liquidity.

Your current plan to pay more cash and take a smaller loan looks safe from an EMI perspective, but there are deeper aspects we should evaluate before deciding.

» Evaluating your liquidity and cash flow needs

Paying Rs 60 lakhs upfront means reducing your cash reserves significantly. Liquidity is the ability to handle emergencies, opportunities, and unexpected needs without stress. Once you use that Rs 60 lakhs, it will be locked in the property, which is an illiquid asset.

If in future you need money for your child’s education, medical needs, or job changes, you cannot easily access this cash. Selling a part of the house or taking a top-up loan is not immediate.

So before paying such a big portion upfront, ask:

– After paying Rs 60 lakhs, how much cash or investment will remain?
– Will you still have at least 12 months of emergency fund?
– Can you manage your son’s school expenses, insurance, and future commitments comfortably?

If the answer to these is uncertain, it is better to safeguard more liquidity rather than locking too much money in the property.

» Analysing the EMI burden and loan structure

A Rs 50 lakh loan for 20 years with today’s interest rate will result in a moderate EMI. Given your income level, the EMI will easily fit within 25–30% of your monthly income. That is healthy.

Even if you take a higher loan, say Rs 70–80 lakhs, your EMI will increase, but still stay affordable considering your joint income of Rs 3.6 lakhs per month. Your total EMIs, including the car loan, will not exceed 40% of your monthly take-home. That is a safe zone for salaried couples with stable jobs.

Therefore, it is financially sound to use the bank’s money more and preserve your cash instead of exhausting liquidity.

» Importance of balancing assets and liabilities

You should remember one key principle: financial security is about balance. If you invest everything into an immovable property, you become asset-rich but cash-poor. If any emergency or opportunity arises, you might need to borrow again at high interest.

It is better to keep at least Rs 25–30 lakhs liquid after the property purchase. You can park it in a mix of short-term debt funds, liquid funds, or fixed deposits. This will give you flexibility, confidence, and peace of mind.

Liquidity acts like an emergency shield for your family.

» The advantage of home loans beyond EMI comfort

Many people see home loans only as a burden. But actually, a home loan gives financial leverage and tax benefits. You can claim deductions for interest under Section 24(b) and for principal repayment under Section 80C.

These deductions reduce your taxable income every year. If you repay too much upfront, you lose these benefits. Keeping a reasonable loan amount helps you save taxes and maintain better cash management.

Also, home loans are the cheapest form of long-term borrowing. Interest rates are lower compared to personal loans or business loans. Using this opportunity smartly allows you to multiply your financial efficiency.

» Understanding emotional versus financial decision

Buying a home is an emotional decision too. It gives pride, comfort, and family security. But emotions should not override financial prudence. You are already paying rent of Rs 30,000 per month. So, if your EMI is around Rs 45,000–55,000, it is a natural extension of your budget.

However, if you drain all your cash for down payment, you will lose the comfort cushion. That can cause stress later if any job change, medical cost, or education need arises.

Emotionally, owning a home feels satisfying. But financially, keeping money accessible ensures long-term peace.

» Importance of emergency fund before property purchase

You have a small child and dependents. Therefore, an emergency fund is non-negotiable. Before you finalise the property payment, you must ensure you have at least 12 months’ worth of living expenses, EMIs, and education costs in liquid form.

This means at least Rs 12–15 lakhs should stay untouched even after the home purchase. This fund protects your family from unexpected job loss, medical emergency, or delay in possession.

If you invest everything in the property, you may need to borrow again in such situations, which brings back debt pressure.

» Evaluating child’s education and future needs

Your son will enter school next year. Education costs in Bengaluru grow quickly. Over the next few years, school and extracurricular expenses will rise. Later, college and higher education will need major funding.

Hence, setting aside some portion for his education planning is important. You can build this systematically through SIPs in diversified equity mutual funds over time.

If you pay too much cash for the house, your ability to start such SIPs will reduce. That delays wealth creation and future preparedness.

» Evaluating the cost of missed investment opportunity

By paying Rs 60 lakhs upfront, you lose potential compounding benefits that your money could have earned in diversified mutual funds or other investments. Over the next 15–20 years, that Rs 60 lakhs could have grown substantially.

On the other hand, the home loan interest you pay is much lower than the long-term returns achievable through properly managed investments. So, keeping some money invested can create parallel wealth while you also own your home.

It is about balancing both — not choosing only one side.

» Psychological comfort and risk tolerance

Some people sleep peacefully when they have less loan. Others feel safer when they have more liquidity. The right choice depends also on your comfort level.

If both of you feel emotionally relaxed by having less EMI, then paying slightly higher down payment is acceptable. But do not go to an extreme where you lose flexibility.

Discuss this openly as a couple. Financial harmony between spouses is very important when taking big decisions.

» Handling the existing car loan

You have an ongoing car loan of Rs 5 lakhs with Rs 16,000 EMI. It is better to continue this loan as per schedule. Do not use your cash reserves to close it early if it reduces liquidity. Car loans are short-term and manageable within your total income.

Focus more on managing your home loan structure efficiently rather than diverting funds to prepay smaller loans.

» Evaluating the best loan-to-value mix

The property cost is Rs 1.1 crore. You can consider paying around 30–35% as down payment (around Rs 35–40 lakhs) and take the rest as a home loan. This way, you get reasonable EMI, tax benefits, and enough liquidity.

By keeping Rs 20–25 lakhs safe, you will handle future uncertainties better. This balance gives both comfort and confidence.

Avoid putting more than 50% of total cost from your pocket unless your income is extremely high and stable.

» Benefits of preserving liquidity through investments

The remaining cash can be invested gradually in a mix of short-term debt funds, hybrid funds, and diversified equity mutual funds.

These funds will act as:
– Emergency corpus.
– Child education reserve.
– Future prepayment support for your home loan.

Having invested funds growing in the background gives flexibility to prepay later if you wish. You can use bonuses or increments to reduce principal slowly rather than paying heavy cash upfront now.

» Future income growth and EMI comfort

Your combined income of Rs 3.6 lakhs per month will likely grow over time. So, a slightly higher EMI now will become more comfortable in future. Therefore, taking a larger home loan today does not mean long-term strain. It actually aligns better with your rising income potential.

This strategy keeps liquidity available today, when you have more responsibilities, and lets you repay faster later when your salary rises.

» Understanding tax and repayment efficiency

By maintaining a home loan, you can claim:
– Up to Rs 2 lakh deduction on interest per year (for self-occupied property).
– Up to Rs 1.5 lakh deduction on principal under Section 80C.

Together, these tax savings reduce your effective cost of loan. When you repay too much upfront, you miss these benefits. So a well-balanced loan amount maximises efficiency.

» Insurance protection for loan liability

Before taking the home loan, ensure you have proper term insurance. The sum assured should cover the loan amount plus future family needs.

This ensures that your spouse and child are fully protected in case of any uncertainty. It is always better to take a separate pure term plan instead of loan-linked insurance from the bank.

Also, have adequate health insurance for all family members. This prevents emergency expenses from disturbing your EMI or savings.

» Long-term financial vision

Owning a house is a milestone, not the final goal. Your bigger goal should be financial freedom. After buying the house, continue disciplined savings for retirement, child education, and emergencies.

Once you settle in your home, start investing monthly through SIPs in diversified mutual funds. They will create parallel wealth and balance the immovable asset of your house.

This way, you will enjoy your home without feeling financially tied to it.

» Practical steps to finalise decision

– Recheck your current savings and how much you can keep aside safely.
– Maintain at least Rs 15–20 lakhs as emergency or investment reserve.
– Opt for a home loan of around Rs 70–75 lakhs if possible.
– Use your cash for down payment, registration, and initial interiors.
– Invest the rest smartly through a Certified Financial Planner.
– Protect your family with term and health insurance before loan disbursal.
– Avoid using credit cards or personal loans for interiors. Plan them gradually.

» Finally

Buying your first home is a proud and emotional decision. You are planning it wisely. Your goal should not be only to reduce EMI but to maintain balance between comfort and liquidity.

Avoid locking too much money into the property. Keep enough liquid funds for emergencies, education, and future opportunities. A slightly higher home loan gives flexibility, tax savings, and financial safety.

Your family’s financial stability should not depend only on the house. It should depend on your cash flow and peace of mind. That comes from balance, not from extremes.

You are already making a responsible and thoughtful decision. Continue this maturity, and your dream home will also become a secure and peaceful home.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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