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Ramalingam Kalirajan |10986 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 21, 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 - Jun 13, 2025Hindi

Hi, I am 41 years old with 5 years old kid. Currently living with Parents in parental owned home. Monthly Salary is 1.3L. I have one car loan and one personal loan. EMI is 53K. In Mutual Fund I have 18L and in Stock 34 L. I do SIP of 14K every month. One life insurance of 10L which will mature in 2029 3.3K every month Deduction . One 1CR term plan 3.5k monthly deduction. I want to buy a flat worth 75L . Should I withdraw all my mutual fund and stock for the down-payment of the flat till 50L and rest 25L on house loan? Kindly advise. I dont want loan amount to increase as I already paying 53K in EMI.

Ans: Current Financial Overview
You are 41 years old with a dependent 5-year-old child.

Monthly salary is Rs 1.3 lakhs.

You are paying Rs 53,000 in EMIs.

You own no house but live in a family-owned one.

You want to buy a Rs 75 lakh flat.

You hold Rs 18 lakhs in mutual funds and Rs 34 lakhs in stocks.

You do SIPs of Rs 14,000 monthly.

You have a Rs 10 lakh life insurance policy (traditional plan).

You also have a Rs 1 crore term insurance with Rs 3,500 monthly premium.

Cash Flow and Debt Management
Current EMIs of Rs 53,000 take away around 41% of your salary.

This puts a big strain on your monthly cash flow.

Adding a home loan EMI now may reduce financial flexibility.

A Rs 25 lakh loan can add Rs 20,000–25,000 more EMI.

That may push your total EMI burden above 60% of your salary.

This will severely limit your monthly savings and investments.

You also have SIPs and insurance premiums of around Rs 17,500.

Your total committed outgo is already around Rs 70,500.

Key Insight:

Ideal EMI should be below 40% of income. You already exceed that.

Taking another EMI is risky at this stage.

Investment Evaluation
Mutual Fund Investments – Rs 18 Lakhs
This is a good portfolio for long-term wealth building.

Redeeming fully will break the compounding effect.

It may also attract tax depending on when and what type of fund.

Equity MFs – LTCG over Rs 1.25L taxed at 12.5%.

STCG taxed at 20%.

Debt MFs – taxed as per income slab.

Also, future goals like child’s education may need this money.

Stocks – Rs 34 Lakhs
Stock market is volatile.

If this includes long-term holdings, you might sell with gains.

However, market timing is hard.

Panic selling could lead to lower returns or tax burden.

It may be better to partially use this corpus.

Insurance Assessment
Traditional Insurance Plan – Rs 10 Lakhs
This is a low-return plan with insurance + investment.

Premium is Rs 3,300/month until 2029.

Returns are likely around 4% to 5% annually.

Not ideal for long-term wealth creation.

Suggested Action:

Consider surrendering this plan.

Reinvest surrender value into a well-chosen mutual fund.

Preferably through a Mutual Fund Distributor with CFP credentials.

This ensures advice, review, and rebalancing support.

Flat Purchase Feasibility
You plan:

Rs 50 lakh from existing investments.

Rs 25 lakh via home loan.

Let’s assess this in steps.

Pros of Your Plan:

Lower loan amount means lower EMI.

Less interest outgo in long run.

Less debt burden mentally and emotionally.

But Consider These Risks:

Wiping out MFs and stocks removes all liquidity.

You will have no emergency backup.

Future expenses for child or health may need urgent funds.

Also, property purchase brings extra expenses:

Stamp duty

Registration

Interiors

Maintenance and society fees

Without MFs and stocks, you will have zero buffer.

Suggested Way Forward
Instead of redeeming full Rs 50 lakhs, consider a blended approach.

Proposed Structure:

Use Rs 25–30 lakhs from mutual fund and stock corpus.

Take a home loan of Rs 45–50 lakhs.

Keep Rs 20–25 lakhs in investments for emergency and future goals.

This way:

You reduce risk of being fully illiquid.

You still limit your loan exposure.

You can also partly prepay your home loan over 3–5 years.

If you can increase salary or reduce EMI in future:

Use surplus to prepay loan aggressively.

Continue your Rs 14,000 SIP if possible.

Or pause it temporarily and resume later.

Emergency Fund and Protection
Currently, your emergency corpus is unclear.

Always keep at least 6 months of expenses + EMI aside.

That would be around Rs 8–9 lakhs minimum.

Without this, you risk taking personal loans again later.

Action Points:

Don’t touch emergency fund or SIPs for house.

Don’t sell all stocks/MFs.

Keep some corpus for flexibility.

Term Insurance – Adequate Coverage
Rs 1 crore term plan is good.

Monthly premium of Rs 3,500 is reasonable.

No change needed here.

What to Avoid
Don’t go for direct mutual funds
Direct funds give no human guidance.

No regular review, advice, or emotional support in volatile times.

Most investors underperform direct plans due to behaviour issues.

Regular plans via CFP-backed Mutual Fund Distributor give:

Ongoing review and rebalancing

Scheme suitability checks

Timely exits or changes

Emotional discipline in ups and downs

This value far exceeds minor cost difference.

Don’t take a bigger home loan
That will kill your SIPs and emergency readiness.

Also increase stress if income is affected later.

Don’t consider index funds
Index funds follow the market blindly.

No downside protection during crash.

No fund manager to act on valuation or sentiment.

Actively managed funds aim to beat index returns.

Good active fund managers provide better long-term risk-adjusted returns.

Tax Considerations
Redeeming mutual funds or stocks may trigger tax.

Don’t redeem everything in one go.

Use planned redemptions over months.

Use tax harvesting if needed.

Consult a tax expert before big redemptions.

Child's Future Needs
Your child is 5 now.

Education cost will peak in next 10–15 years.

You need long-term growth-focused investment for this.

Don’t wipe out investments now, else you may face shortage later.

Real Estate as Asset Class
Don’t see home buying as an investment.

It is a lifestyle asset.

It gives emotional comfort and social status.

But it doesn’t generate income.

No tax saving beyond limited Section 24(b) interest.

Finally
Your urge to avoid higher loans is understandable. That’s prudent.

But wiping out your entire mutual fund and stock wealth is risky.

Keep Rs 20–25 lakhs intact for future needs.

Buy the house with a mix of 30–35 lakh own contribution and 40–45 lakh loan.

Ensure you don’t disturb your SIP or emergency plans too much.

Avoid real estate obsession, direct funds, and traditional insurance products.

And always route your mutual fund investments through a well-qualified CFP-backed Mutual Fund Distributor.

This ensures your plan stays updated, suitable, and resilient.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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