Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |10879 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 29, 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 22, 2025

Hello sir M 38 years old. I hve outstanding home loan of 33 lakhs for 15 years rest all loans are settled. I hve 13L in ppf , 3L in gold bonds , 5L. In mutual funds, 20L in FD and around 20L in account. How should I plan my investment and should I prepay my home loan My monthly salary is average 2.5L

Ans: Your financial standing is strong. Let’s now structure a 360-degree investment and loan strategy.

Cash Flow Review and Surplus Allocation

You earn Rs. 2.5L per month. That’s quite healthy. Appreciate your discipline.

After expenses, check how much you save monthly. Let us call it your surplus.

Use this surplus to build future wealth and secure your financial goals.

From your assets and loan, I assume your monthly EMI could be around Rs. 30,000 to Rs. 35,000.

That leaves you with a lot of investable surplus. You must use this power well.

Home Loan Prepayment – Good or Delay?

You have Rs. 33L loan left for 15 years. That is long.

But interest paid in initial years is always higher than principal.

You also have Rs. 20L in bank and Rs. 20L in FD.

These are earning much lesser than what you're paying in loan interest.

If your home loan interest is above 8%, then prepayment is worth considering.

Still, don’t rush to close full loan. Keep some funds for emergencies and investments.

Ideal is to partly prepay now. Maybe Rs. 10L to Rs. 15L.

That will reduce interest burden and loan tenure both.

Continue regular EMIs. Use future bonuses or increments for further prepayment.

Emergency Fund Strategy

Out of Rs. 20L in bank and Rs. 20L in FD, earmark Rs. 6L to Rs. 8L.

This will act as emergency fund for family’s medical and job loss cover.

Put 3 months’ expenses in savings account. Keep balance in liquid or ultra short debt funds.

Don't touch this fund unless it's real emergency.

Re-evaluate Fixed Deposits

FD gives low returns and is taxable as per your tax slab.

You are in high income slab. So, net FD returns are very low.

Don’t keep Rs. 20L in FD. It’s hurting wealth growth.

Use FD only for near-term needs like a goal in 1 to 3 years.

Rest of FD should be moved to better performing investment options.

Mutual Fund Portfolio – Strengthen This Block

You have Rs. 5L in mutual funds. That is a good start. Appreciate your effort.

But this needs more attention and proper structuring.

Ensure funds are diversified across large, flexi cap, mid cap and hybrid funds.

Use only regular mutual funds through an MFD guided by a Certified Financial Planner.

Avoid direct plans. They lack guidance, review, and behavioural coaching.

Many investors pick random direct funds and lose compounding power.

A good CFP with MFD support helps with long-term discipline and fund switching strategy.

Why You Must Avoid Index Funds and ETFs

Index funds blindly copy market. They can’t avoid poor performing stocks.

No active decision-making. No alpha generation. No downside protection.

In falling markets, index funds fall more. Active funds can reduce losses.

Also, index funds lack flexibility. They follow index weight, not market conditions.

Best option is active mutual funds. Your fund manager takes active calls.

Active funds have historically beaten passive ones in India in most market phases.

Gold Bonds – Hold and Don’t Add More

You have Rs. 3L in gold bonds. That’s fine for diversification.

Don’t add more unless you have a specific future goal like daughter’s marriage.

Gold is good hedge, but not a return generator. Just hold what you have.

Don’t consider gold for monthly investments. It doesn’t support long-term goals well.

PPF – Keep Contributing, but Don’t Overdo

You already have Rs. 13L in PPF. That’s wonderful.

It’s safe, tax-free and long-term. Helps in retirement planning.

But PPF is illiquid. And max Rs. 1.5L allowed per year.

Use it to full limit yearly. But don’t put more surplus here.

Mutual funds should take higher share for long-term wealth.

PPF and MF together balance risk and returns nicely.

Build Monthly SIP Discipline

With Rs. 2.5L monthly salary, you can easily do Rs. 50k to Rs. 75k SIP.

Spread this into 4-5 actively managed regular mutual funds.

Use large cap, flexi cap, mid cap, and one hybrid or balanced advantage fund.

Select fund categories as per your goals and risk comfort.

SIPs must continue for 10 years or more to create real wealth.

Avoid frequent pausing or switching. Compounding needs patience.

Tax Planning Insight

Use your PPF, term insurance and mutual fund ELSS for tax savings.

ELSS is best among 80C options. Has lock-in, but also gives equity returns.

Avoid ULIPs and endowment plans. They mix insurance and investment poorly.

As a rule, buy insurance only for risk cover. Investment should stay separate.

Also, understand mutual fund capital gains tax rules.

New Tax Rules on Mutual Funds – You Must Know This

For equity mutual funds, long-term capital gains above Rs. 1.25L is taxed at 12.5%.

Short-term capital gains on equity mutual funds are taxed at 20%.

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

Track your investment holding periods. Plan redemptions smartly with a CFP.

Don’t do random withdrawals. It can create avoidable tax and return loss.

Future Goal Planning – Build a Roadmap

List out your major goals – child’s education, retirement, travel, marriage, etc.

Assign time frame and target value for each goal.

Map each goal with one or two specific mutual funds.

Review this strategy once every 6 months. Make changes only when needed.

Don’t mix all goals in one investment. That creates confusion later.

A Certified Financial Planner can help with this mapping and review.

Insurance Check – Very Important

Ensure you have term life insurance of at least 15 times your annual income.

If not, take it right away. Only term insurance. No endowment or ULIP.

You must also have family floater health insurance of Rs. 15L to Rs. 20L.

Don’t rely on employer coverage alone. It ends when job ends.

Medical costs are rising fast. Proper health cover is must.

Don’t Delay a Financial Plan – Take Action Now

You are in a very strong financial position.

You have cleared most loans. You have surplus and assets. Appreciate your efforts.

Now you need right structuring and action plan. Not just savings. But long-term investing.

Delay in investing or poor asset allocation can waste compounding power.

Create a roadmap. Commit to SIPs. Trim FD. Partial loan prepay. Balance all areas.

Get help from a Certified Financial Planner. Not bank RM. Not online robo platforms.

Review everything once in 6 months with expert support.

Only then real wealth creation happens with confidence.

Final Insights

Part-prepay home loan. Not full. Keep balance for growth investing.

Restructure idle FD and bank savings into mutual funds.

Don’t touch emergency funds. Keep it separate.

Grow mutual fund portfolio with SIP discipline. Use active, regular funds. No direct, no index.

Maintain health and term insurance cover properly.

Use PPF and ELSS smartly for tax. Avoid any insurance-linked plans.

Build goal-based plan. Use certified guidance. Track, review, adjust as needed.

You have income, assets and intent. Now, give it structure and direction. That’s the missing piece.

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.