I am 44years professional working in Engineering field. My total monthly income is 300k. I get 225k net in hand from Salary and have a rental income of 75k from three properties. I invest monthly 12.5k in PPF, 5k in MF, 5k in Gold Funds. I have two home loans of 40lacs and 50lacs on two properties and my EMI is 87k. Current RoI is 10.65% and 9.55% respectively. Since I have bank's max gain scheme, I park all my surplus funds in my home loan account to save on interest. Shall I continue doing extra loan repayments or shall I consider investing in other avenues having higher returns? Also my PPF is maturing in this month and is considering repayment & closure of one of my home loan account with these PPF maturity funds. Is this a correct approach, since I am expecting major educational expenses for my elder son in couple of years?

Ans: Current Financial Situation
Age: 35 years
Location: Hyderabad
Take Home Salary: Rs 1.4 lakhs
Home Loan: Rs 48 lakhs (taken in 2019 for 20 years), EMI of Rs 42,000
Personal Loan EMI: Rs 20,000
Monthly SIPs: Rs 20,000 in equity mutual funds
PPF Contribution: Rs 3,000 monthly
NPS Contribution: Rs 4,000 monthly
Learning and Courses: Rs 2 lakhs annually (~ Rs 16,667 monthly)
Traveling: Rs 2 lakhs annually (~ Rs 16,667 monthly)
Car Purchase Plan: Car worth Rs 12 lakhs, with additional Rs 20,000 monthly for fuel and EMI
Accumulated Balances
Mutual Funds: Rs 12 lakhs
PPF: Rs 2 lakhs
NPS: Rs 2.5 lakhs
PF: Rs 10 lakhs
Stocks: Rs 1 lakh
Key Considerations
Debt Management: High EMIs for home and personal loans
Investment Strategy: Existing SIPs and contributions to PPF and NPS
Future Commitments: Potential car purchase and associated costs
Financial Goals: Early repayment of home loan and disciplined investment approach
Evaluating Options for Early Home Loan Repayment
1. Additional EMIs
Advantage: Directly reduces the principal amount, leading to significant interest savings over time.
Disadvantage: Reduces your monthly disposable income and might strain your budget.
2. Separate SIP for Loan Repayment
Advantage: Potential for higher returns from the market, which can be used to repay the loan lump sum.
Disadvantage: Market risk; returns are not guaranteed and depend on market performance.
Recommended Strategy
A. Debt Prioritization
Focus on High-Interest Debt: Prioritize clearing the personal loan first due to its likely higher interest rate compared to the home loan.
Channel Extra Funds: Allocate any bonuses or surplus income towards additional EMIs for the personal loan.
B. Structured SIP Approach
Start a Separate SIP: Set up a dedicated SIP to accumulate funds for home loan repayment.
Allocation: Aim to invest Rs 20,000 monthly in a diversified equity mutual fund for the next 10 years.
Growth Potential: Given the long-term horizon, this can potentially yield higher returns, aiding in substantial repayment.
C. Maintain Existing Contributions
Continue SIPs: Maintain your current SIPs of Rs 20,000 to ensure long-term wealth accumulation.
PPF and NPS Contributions: Continue with your PPF and NPS contributions for tax benefits and retirement savings.
D. Budget for Future Commitments
Car Purchase: Reevaluate the necessity and timing of the car purchase. If essential, consider a smaller loan amount to avoid overburdening your finances.
Additional Costs: Plan for the additional Rs 20,000 monthly for the car's fuel and EMI by reassessing discretionary expenses.
Financial Discipline and Adjustments
Maintain Emergency Fund: Ensure you have an adequate emergency fund covering 6-12 months of expenses.
Expense Management: Track and manage discretionary expenses like courses and travel. Ensure these do not impede your loan repayment goals.
Review and Rebalance: Periodically review your investment portfolio and rebalance as needed to stay aligned with your goals.
Final Insights
Early repayment of your home loan is achievable with disciplined financial management. Prioritize paying off high-interest debts first. Start a separate SIP for home loan repayment, leveraging the market's growth potential. Maintain existing investments and ensure you have a well-structured budget to accommodate all commitments without straining your finances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Evaluating Your Financial Strategy
Current Financial Situation
Monthly Income: Rs 1 Lakh
Home Loan: Rs 45 Lakh with an EMI of Rs 37,000
Mutual Fund Investments: Rs 56 Lakh
PPF Investments: Rs 15 Lakh
Emergency Fund: Rs 6 Lakh in FD and 50 gm SGB
Monthly SIP in Equity: Rs 30,000
Monthly Expenses: Rs 30,000 - 35,000
Insurance: Term Insurance of Rs 2 Crore, Health Insurance of Rs 25 Lakh
Assessing the Home Loan
Current EMI: Rs 37,000, which is 37% of your monthly income.
Interest Rates: Home loan interest rates are usually lower compared to equity returns.
Recommendation: If possible, continue with your SIPs and emergency fund while managing the EMI.
Impact of Breaking Investments
Mutual Funds: Breaking these could impact your long-term wealth accumulation due to the loss of compounding benefits.
PPF: This is a long-term, low-risk investment. Withdrawing it might not be ideal.
Recommendation: Avoid breaking investments unless it's crucial for financial stability.
Future Goals and Planning
Children’s Education: Targeting Rs 50 Lakh in 15 years.
Retirement Corpus: Aiming for Rs 6 Crore.
Investment Strategy for Education:

Continue investing in equity mutual funds and SIPs.
Consider increasing SIP amounts as income grows or expenses reduce.
Investment Strategy for Retirement:

Regular investments in mutual funds with a diversified portfolio.
Include equity for growth and debt for stability.
Emergency Fund and Liquidity
Current Emergency Fund: Rs 6 Lakh is a good start.
Recommendation: Maintain this fund to cover unexpected expenses. Consider increasing it as your income grows.
Insurance Coverage
Term Insurance: Adequate coverage with Rs 2 Crore.
Health Insurance: Rs 25 Lakh coverage is good, but ensure it meets all family needs.
Financial Strategy Moving Forward
Maintain Investments: Continue with your mutual funds and SIPs to benefit from compounding.
Increase SIPs: As your financial situation improves, increase SIPs for better accumulation.
Review Regularly: Regularly assess and adjust your investment and financial strategies with a certified financial planner.
Final Insights
Balancing between paying off the home loan and growing your investments is crucial. Avoid breaking your investments unless absolutely necessary. Focus on maintaining and increasing your SIPs and keep a robust emergency fund. Regularly review your financial goals and strategies to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your diverse asset portfolio is commendable, and it’s evident that you have maintained a disciplined approach to saving and investing. Given your age and current financial stability, your main focus should be on maintaining financial security and generating a steady income with minimal risk.

Should You Close Your PPF Account?
Maturity and Tax Benefits: Your PPF account has matured since it’s 25 years old. You can extend it in blocks of five years. PPF provides tax-free returns, which is a significant advantage.

Liquidity Needs: If you need liquidity, withdrawing from PPF can be considered. However, the interest rate on PPF is generally higher than bank FDs. Keeping a portion of your investment in PPF can be beneficial for tax-free growth.

Diversification: While PPF is safe, diversifying into other instruments like bank FDs, saving schemes, and mutual funds can provide a balanced risk-return profile.

Reverse Mortgage Loan Consideration
What is a Reverse Mortgage?: A reverse mortgage allows you to borrow against the value of your house. You receive payments while living in the house, and the loan is repaid when you sell the house or pass away.

Benefits: This can provide a steady income stream without selling your house. Funds received can be used for living expenses or investments.

Investment Strategy: Using the loan amount for SIPs in mutual funds can generate potential returns. This can be a smart move if the returns from SIPs exceed the interest on the reverse mortgage.

Investment Strategy for Mutual Funds
Mutual Funds over FDs: Mutual funds, especially debt and balanced funds, offer potentially higher returns compared to bank FDs. They also provide better tax efficiency if held for the long term.

Systematic Investment Plan (SIP): Investing in mutual funds through SIPs can help in averaging out market volatility. Regular investments ensure disciplined investing and potential growth.

Assessment of Your Current Holdings
Fixed Deposits: You have Rs 50 lakhs in various FDs. While FDs are safe, the returns might not keep pace with inflation. Consider investing a portion in debt mutual funds for better post-tax returns.

Mutual Funds: Your mutual fund holdings are advantageous for growth and liquidity. Continue evaluating the performance and consider consulting a Certified Financial Planner for specific fund recommendations.

Gold and Jewellery: Your gold and jewellery worth Rs 15 lakhs serve as a good hedge against inflation. However, they should not form a significant part of your liquid assets.

Monthly Expenses and Cash Flow
Low Monthly Expenses: Your monthly expenses are Rs 10,000, which is quite manageable given your income sources. Staying with your daughter further reduces your financial burden.

Income Sources: Ensure your investments provide a steady income stream. Consider SWP (Systematic Withdrawal Plan) from mutual funds for regular income.

Detailed Investment Recommendations
Bank Fixed Deposits: Keep some portion in bank FDs for safety and guaranteed returns. Senior citizen schemes also offer higher interest rates.

Saving Schemes: Consider investing in senior citizen savings schemes for assured returns. These are specifically designed for senior citizens with attractive interest rates.

Mutual Funds: Diversify your mutual fund investments across different categories. Include a mix of equity, debt, and balanced funds. Actively managed funds can potentially offer better returns than index funds.

Regular vs Direct Funds: Investing through a Certified Financial Planner in regular funds can provide professional management and guidance. Direct funds may have lower expense ratios, but the expertise of a professional can help in optimizing returns.

Final Insights
Balanced Approach: Maintain a balance between safety and growth. Keep some funds in safe instruments like FDs and senior citizen schemes while investing in mutual funds for growth.

Professional Guidance: Consult a Certified Financial Planner to tailor your investment strategy to your specific needs and risk tolerance.

Health and Emergency Fund: Ensure you have adequate health insurance and an emergency fund for unforeseen expenses.

Review and Adjust: Regularly review your investment portfolio and make adjustments as needed based on market conditions and your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Dear Friend, Given your current financial standing, closing your home loan by March 2025 seems like a wise choice. You have Rs 26.5L parked in the SBI Max Gain account, which already reduces your interest liability. By clearing the remaining Rs 12.65L, you can become debt-free, providing peace of mind and freeing up your EMI payments for additional investments. While the home loan offers tax benefits under the old regime, the psychological comfort of being debt-free may outweigh the potential tax savings, especially since your financial portfolio is already strong.
Once the loan is closed, increasing your monthly SIPs to Rs 2L would be a smart move. Over the next 10 years, equity mutual funds, which historically offer returns of 10-12% annually, can significantly grow your wealth. Since you are already investing in a diversified portfolio of index, small-cap, mid-cap, and flexi-cap funds, increasing these investments aligns well with your long-term goals.
Investing in real estate, particularly land, can provide diversification. However, real estate is typically less liquid and the returns can be location-dependent. If you're confident in the property’s growth potential, this can be a good long-term investment. However, your existing strategy of focusing on equity mutual funds will likely offer better returns and flexibility, given your 10-year investment horizon.
So closing your home loan by March 2025 and redirecting the freed-up funds into increased SIPs appears to be the best route. It balances peace of mind, tax efficiency, and long-term wealth creation, while real estate can be considered for diversification if you find a promising opportunity.
There are many real estate opportunities like REIT or Partial ownership in commercial properties which can also yield between 14 to 22% overall return with about 5 to 8% monthly return and 10 to 12% of Growth in the Asset Value at end of tenure.
Investment is commodities like gold and silver can also yield a return of 8 to 10% with reducing the risk in one sector.
Diversification is the mantra, do not depend on only one or two type of investment avenues. Explore other options as well.

Best regards,
Nitin Narkhede
Founder & MD, Prosperity Lifestyle Hub https://Nitinnarkhede.com
Free Webinar https://bit.ly/PLH-Webinar