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Ramalingam Kalirajan |8940 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 19, 2025

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 - May 18, 2025

Dear Sir, I am 39 Year old with in-hand salary 1.9L. I have an ongoing homeloan of 48L with an EMI of 37k per month. I am paying 50k to principal in every quarter. Also I have a cash in saving account (emergency fund) 10L, Gold 24L, MF around 7.5L and stocks around 4L. Pls suggest if this looks fine or what changes i should do for proper balancing my finances. Shall I focus on loan prepayment or more into investment.

Ans: You have made strong financial progress. You earn well, invest regularly, and maintain discipline. Let’s now do a deep evaluation and give a complete 360-degree plan. We will look at debt, investments, risk protection, asset mix, and your goals.

This will help you get better clarity and balance in your money life.

1. Emergency Fund – Good, but Rebalance a Bit

Rs. 10 lakh as emergency fund is quite healthy. You’re well-prepared for sudden needs.

Ideally, 6 to 9 months of expenses is enough. For you, Rs. 5–6 lakh is sufficient.

Keep part in a sweep-in FD linked savings account.

Move the extra amount to debt mutual funds for higher returns with some liquidity.

2. Home Loan Strategy – Continue Part Prepayments Smartly

Your Rs. 48 lakh home loan with Rs. 37,000 EMI is well within your income capacity.

Paying Rs. 50,000 principal every quarter is a smart move. It reduces interest load.

This gives you a good balance between investment and debt reduction.

Avoid lump sum full closure now. Use part-prepayment method.

This way, you retain liquidity and reduce loan burden over time.

Keep this strategy going for next 6–7 years.

3. Mutual Funds – Continue, But Review the Mix

Rs. 7.5 lakh in mutual funds is a good beginning.

Check asset allocation across large, mid, and small cap.

Avoid overexposure to mid and small cap funds. They are volatile.

Add more to diversified flexi-cap and large cap funds.

Choose actively managed funds only. Avoid index funds.

Index funds don’t adapt to market changes. Active funds are better in down cycles.

Direct funds look cheap, but not better for long-term investors.

Regular funds via a qualified Mutual Fund Distributor with CFP help you track and rebalance.

You get guidance, discipline, and human advice that apps don’t provide.

4. Equity Stocks – Don’t Over-Rely

Rs. 4 lakh in stocks is okay. Keep it under 10–15% of your portfolio.

Individual stocks carry high risk. Not suitable for core long-term goals.

Treat it as satellite allocation. Limit exposure.

Stay invested in quality businesses only.

Avoid over-trading or short-term speculation.

5. Gold – Need to Reduce Overweight

Rs. 24 lakh in gold is very high. It is around 60% of your financial assets.

Gold is for protection, not long-term growth.

Prices can stagnate for years. No income is generated.

Keep only 10–15% of your portfolio in gold.

Start gradually redeeming and shifting to mutual funds.

You can use gold to prepay part of the home loan or invest in flexi-cap funds.

Don’t exit all at once. Spread over next 12 to 24 months.

6. Income vs Expenses – Room to Save More

You earn Rs. 1.9 lakh per month in hand. EMI is only Rs. 37,000.

This gives you high saving potential. Use it well.

Target to invest at least Rs. 70,000 to Rs. 80,000 per month.

Break it into SIPs, debt funds, and some into equity.

Emergency fund and gold already give you base safety.

So now, focus more on compounding growth.

7. Retirement Planning – Need Structured Focus

At 39, you have 18–20 years for retirement.

Start a separate retirement SIP portfolio.

Use a mix of equity and hybrid mutual funds.

This should be at least Rs. 25,000–30,000 per month.

Rebalance yearly with a Certified Financial Planner.

Don’t depend on PF alone. It won’t be enough for modern lifestyle needs.

8. Child Education and Family Goals – Plan Now

If you have children, their future needs planning.

Start a dedicated SIP for higher education or marriage.

Keep it separate from retirement funds.

Education costs are rising fast. Early action helps.

9. Insurance – Must Protect What You Built

Term insurance is a must if you have dependents.

Cover should be at least 15 to 20 times of yearly income.

Avoid endowment or ULIP policies.

If you already have them, consider surrendering.

Reinvest proceeds in mutual funds through a qualified CFP.

Also ensure you have health insurance for all family members.

Check if coverage is minimum Rs. 10–15 lakh per person.

Use top-up plans if base cover is low.

10. Tax Planning – Optimise Smartly

Use full benefits under Section 80C with PPF, EPF, or ELSS.

Avoid locking money into tax-saving FDs with low returns.

Plan HRA, housing loan interest, and NPS for extra deductions.

Use new capital gains rules when you redeem mutual funds.

Equity fund gains above Rs. 1.25 lakh taxed at 12.5%.

Short-term equity fund gains taxed at 20%.

For debt funds, gains are taxed as per your slab.

11. Asset Allocation – Time to Restructure

Your current structure is skewed toward gold.

You need a mix of equity 50%, debt 30%, gold 10–15%.

This will give balance between growth, safety, and liquidity.

Do this realignment slowly over next 12–18 months.

12. Investment Tracking – Do Yearly Review

Review your portfolio once a year.

Rebalance if any one asset class moves too much.

Exit underperforming funds and move to better ones.

Take help of a CFP for regular review.

Avoid chasing returns or timing market.

Stick to plan with discipline.

13. Psychological Strength – Stay Patient and Calm

Don’t panic in market falls. Stay invested.

Avoid comparing with others. Your plan is unique.

Investing is a slow, steady journey.

Focus on consistency, not speed.

Celebrate small milestones. Stay motivated.

Finally

You’ve done many things right already. Strong salary, low EMI, good saving habits.

Just reduce gold holding and rebalance into growth assets.

Continue smart prepayment of loan, but don’t be in a rush to close.

Increase investments now, especially into mutual funds and SIPs.

Plan separately for retirement, education, and protection.

Follow a structured plan under guidance of a CFP.

Track yearly and adjust as life changes.

Your future can be safe, growing, and peaceful with this disciplined approach.

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.