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Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 21, 2024

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
S Question by S on May 18, 2024Hindi
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Sir, Shall I invest in UTI Nifty200 Momentum 30 Index Fund - Regular Plan - Growth @ N.A.V. - Rs. 23/= Is it a good investment for long term - 10 years ?

Ans: Avoiding UTI Nifty200 Momentum 30 Index Fund for Long-Term Investment

When considering long-term investments like retirement planning or wealth accumulation, it's crucial to evaluate the suitability of various investment options. While index funds offer simplicity and low costs, opting for actively managed funds may provide distinct advantages, especially over an extended investment horizon like 10 years.

Why Index Funds May Not Be Ideal for Long-Term Investment

Limited Growth Potential: Index funds, including the UTI Nifty200 Momentum 30 Index Fund, aim to replicate the performance of a specific market index. However, they are inherently limited in their growth potential as they cannot outperform the market significantly.

Passive Management Constraints: Index funds adhere to a passive investment strategy, meaning they track the composition of a predefined index. This approach lacks the flexibility and agility of active management, making it challenging to capitalize on market opportunities or adapt to changing economic conditions effectively.

Market Volatility Exposure: During periods of market volatility or downturns, index funds may experience significant fluctuations in value without the active management needed to mitigate risks or exploit investment opportunities.

Advantages of Active Funds for Long-Term Investing

Potential for Superior Returns: Actively managed funds are led by skilled fund managers who actively research and select investments with the aim of outperforming the market. This active management strategy can lead to potentially higher returns over the long term.

Dynamic Portfolio Adjustments: Active fund managers have the flexibility to adjust the portfolio holdings based on changing market conditions, economic trends, and company fundamentals. This dynamic approach enables them to seize opportunities and navigate market risks more effectively.

Risk Management: Active managers can employ risk management techniques such as diversification, sector rotation, and asset allocation adjustments to mitigate downside risks and preserve capital, providing investors with a smoother investment experience.

Considerations for Long-Term Investors

Investment Goals and Risk Tolerance: Assess your long-term investment objectives and risk tolerance before making investment decisions. If you seek potentially higher returns and are comfortable with active management, actively managed funds may be more suitable for your investment goals.

Diversification and Asset Allocation: While considering actively managed funds, ensure diversification across different asset classes, investment styles, and fund categories to manage risk effectively and enhance portfolio resilience.

Cost-Benefit Analysis: While actively managed funds may have higher expense ratios compared to index funds, evaluate the potential returns and added value provided by active management to determine whether the higher costs are justified based on your long-term investment objectives.

Final Recommendation

Given the limitations of index funds for long-term growth and the potential benefits offered by actively managed funds, it would be prudent to explore alternative investment options that provide the potential for superior returns and effective risk management over a 10-year investment horizon.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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.
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Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 11, 2024

Asked by Anonymous - Jun 09, 2024Hindi
Money
I am 29. I am investing 10k in ICICI pru Flexi cap, 5k in Parag Parikh Flexi cap, 5k in Nippon India Small Cap, 5k in SBI Nifty Midcap 150 Index fund, 2.5k in Quant Midcap, 2.5k in Nippon Multi cap. Will this be good for a long term investment? Say around 20 years.
Ans: Firstly, let me appreciate your initiative and discipline in investing. At 29, you are already taking significant steps towards securing your financial future. Your current SIPs total Rs. 30,000 per month across various funds, and you’re wisely looking at a long-term horizon of 20 years. Let’s dive into your investment strategy and evaluate how to optimize it for achieving your goals.

Review of Current Investments
Your portfolio is diversified across flexi-cap, small-cap, mid-cap, and multi-cap funds, including an index fund. This mix is good for spreading risk and capitalizing on growth opportunities in different market segments. Each type of fund has its characteristics, benefits, and risks.

Assessing the Current Portfolio
1. Portfolio Diversification:

Your portfolio's diversification is commendable. You have invested in various fund categories, which is crucial for risk management.

2. Allocation Breakdown:

Flexi-cap Funds: 50% allocation.
Small-cap Funds: 17% allocation.
Mid-cap Funds: 20% allocation.
Multi-cap Funds: 13% allocation.
3. Risk and Return Balance:

This allocation provides a balance between high growth potential (small and mid-cap funds) and stability (flexi-cap and multi-cap funds).

Enhancing Your Investment Strategy
1. Increase SIP Amount Periodically:

Consider increasing your SIP amount by 10% annually. This will significantly enhance your corpus over the long term. For example, increasing your SIPs yearly can amplify your investment growth, thanks to the power of compounding.

2. Regular Portfolio Review:

Review your portfolio's performance at least once a year. This ensures you stay aligned with your financial goals and make necessary adjustments.

3. Rebalancing:

Rebalancing helps maintain your desired asset allocation. It involves selling some investments that have performed well and buying more of those that haven’t, to maintain a target allocation.

Power of Compounding
Compounding is your best friend in long-term investing. The longer you stay invested, the more your money works for you. Reinvesting your returns leads to exponential growth.

1. Long-Term Growth:

Compounding allows your investments to grow faster as you earn returns on both your initial investment and the accumulated returns over time.

2. Patience Pays:

The key to benefiting from compounding is patience. Stay invested for the long haul and avoid the temptation to withdraw funds prematurely.

Advantages of Mutual Funds
1. Professional Management:

Mutual funds are managed by experienced fund managers who make informed investment decisions on your behalf.

2. Diversification:

They offer diversification across various sectors and asset classes, reducing the risk of significant losses.

3. Liquidity:

Mutual funds are highly liquid, meaning you can redeem your investments relatively easily when needed.

4. Flexibility:

There are various types of mutual funds to suit different risk appetites and investment goals.

Evaluating Fund Categories
1. Flexi-Cap Funds:

These funds invest in companies of all sizes and offer flexibility and diversification. They adjust their portfolio mix based on market conditions, aiming for optimal returns.

2. Small-Cap Funds:

Small-cap funds invest in smaller companies with high growth potential but come with higher volatility. They can offer substantial returns over the long term if you can withstand short-term market fluctuations.

3. Mid-Cap Funds:

Mid-cap funds invest in medium-sized companies with strong growth prospects. They strike a balance between the stability of large-caps and the high growth potential of small-caps.

4. Multi-Cap Funds:

Multi-cap funds invest across large-cap, mid-cap, and small-cap stocks. They provide a balanced approach, reducing risk while aiming for growth.

5. Index Funds:

Index funds aim to replicate the performance of a specific market index. They offer lower expense ratios but might not outperform the market. Actively managed funds, like those you have, seek to outperform market indices through active stock selection.

Risks and Mitigation
Investing in mutual funds involves certain risks, but these can be managed:

1. Market Risk:

Diversify across various asset classes and sectors to spread risk.

2. Interest Rate Risk:

Maintain a mix of equity and debt funds to mitigate the impact of interest rate fluctuations.

3. Credit Risk:

Invest in funds with high credit ratings to minimize default risk.

4. Inflation Risk:

Equity funds can potentially outpace inflation, preserving the purchasing power of your investments.

Tax Implications
1. Long-Term Capital Gains (LTCG):

Gains from equity funds held for more than one year are taxed at 10% for amounts exceeding Rs. 1 lakh annually.

2. Short-Term Capital Gains (STCG):

Gains from equity funds held for less than one year are taxed at 15%.

3. Tax-Saving Funds:

Consider investing in Equity Linked Savings Schemes (ELSS) for tax benefits under Section 80C.

Role of a Certified Financial Planner
A Certified Financial Planner (CFP) can provide valuable guidance:

1. Personalized Advice:

CFPs offer tailored advice based on your unique financial situation and goals.

2. Portfolio Management:

They help monitor and rebalance your portfolio to ensure it aligns with your objectives.

3. Tax Planning:

CFPs offer strategies to optimize your tax liabilities, maximizing your investment returns.

Final Insights
Your investment strategy is on the right track. With consistent SIPs, regular reviews, and periodic rebalancing, you can achieve your financial goals. Here are some key takeaways:

1. Increase SIPs Annually:

Boost your investment amount by 10% each year to leverage the power of compounding.

2. Monitor Performance:

Keep an eye on your portfolio’s performance and make adjustments as needed.

3. Diversify:

Continue diversifying across various fund categories to manage risk and maximize returns.

4. Stay Informed:

Keep yourself updated on market trends and fund performance to make informed decisions.

5. Seek Professional Guidance:

Consider consulting a Certified Financial Planner for personalized advice and ongoing portfolio management.

Your commitment to long-term investing is commendable. Stay disciplined, be patient, and let the power of compounding work its magic. You are well on your way to achieving your financial aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 22, 2024

Asked by Anonymous - Sep 14, 2024Hindi
Money
I am planning to invest in nifty 500 momentum 50 index fund is it a good one?
Ans: You’re considering investing in a Nifty 500 Momentum 50 Index Fund. It's a well-thought-out move to look into this fund, especially since momentum investing has gained popularity. However, it’s essential to assess the pros and cons thoroughly before making a decision. I’ll break this down from multiple angles to give you a comprehensive view, which can guide your investment decision.

Momentum investing is a strategy that involves buying stocks with strong recent performance and avoiding or selling those with poor recent performance. Momentum index funds focus on companies showing positive price trends. Let’s analyse if this approach suits your long-term financial goals.

Momentum Strategy: Key Benefits

Capitalising on Trends: The primary advantage of momentum investing is that it allows you to ride the wave of strong performers. Stocks that are rising tend to keep rising, and momentum funds aim to capture that.

Diversified Exposure: This fund tracks the top 50 companies in the Nifty 500 with the highest momentum. So, you’re diversifying across a range of sectors while still focusing on momentum.

Data-Driven Approach: Momentum funds are based on quantifiable data. The stock selection process uses metrics that look at recent performance and volatility, making the approach more systematic.

Potential Limitations of Momentum Index Funds

While momentum investing has advantages, there are some downsides to consider.

Over-Reliance on Market Trends: Momentum funds chase recent trends. This means they could buy high and sell low if trends reverse quickly. If the market shifts abruptly, you could face losses.

Limited Active Management: Momentum index funds don’t have the flexibility that actively managed funds offer. They strictly follow the index's composition, even if market conditions change.

No Tailoring for Your Needs: Because this is a passively managed fund, it won’t be customised to your individual goals or risk tolerance. This is a key disadvantage compared to actively managed funds.

Active vs Passive Funds: Which is Better?

You’ve expressed interest in an index fund, but it’s crucial to understand why actively managed funds might provide better opportunities for long-term wealth creation.

More Flexibility: Actively managed funds allow a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD) to adjust the portfolio based on market conditions. This flexibility can help reduce losses during market downturns.

Tailored Investment Approach: Unlike index funds, actively managed funds offer a strategy aligned with your goals. For instance, if your financial objectives or risk profile change, your MFD or CFP can adjust the investments accordingly.

Greater Potential for Outperformance: Index funds track the broader market or a segment of it, but actively managed funds aim to outperform the market by selecting quality stocks.

Market Timing: Active managers, guided by CFPs, have the flexibility to exit stocks before a market downturn, which is impossible in passive index funds.

In essence, actively managed funds are designed to respond to market dynamics in a way that index funds cannot. This could mean more effective risk management and higher returns over time.

Disadvantages of Direct Funds

Investing in direct funds might seem like a cost-saving option, but there are significant disadvantages you need to be aware of. A Certified Financial Planner can help you understand these better.

Lack of Professional Guidance: When you invest in direct funds, you miss out on the advice and guidance of a professional. This could lead to poor fund selection and bad timing of your investments.

No Customisation: Direct funds do not offer personalised advice based on your financial goals. Working with a CFP ensures that your portfolio is designed to meet your specific needs.

Complexity in Monitoring: Direct funds require you to manage and monitor your portfolio yourself. Without professional guidance, it becomes difficult to keep track of market changes and make timely adjustments.

Risk of Emotional Decision-Making: With direct funds, you may make emotional decisions, such as selling during market downturns or buying during upswings. A CFP can help you stay disciplined and avoid these common mistakes.

Investing through a CFP-certified MFD allows you to benefit from professional guidance, helping you build a portfolio aligned with your long-term financial goals.

Momentum Funds vs Actively Managed Funds: Which is More Suitable?

Momentum funds have their appeal, especially in bull markets. But when you compare them to actively managed funds, the latter often emerge as a better choice for a few reasons:

Better Risk Management: Active managers can exit overvalued stocks, which momentum index funds cannot do.

Focus on Fundamentals: Momentum funds do not necessarily consider the fundamental strength of companies. Actively managed funds focus on stocks with strong fundamentals, helping you build a solid portfolio.

Flexibility to Invest Across Market Cycles: Momentum funds may struggle in volatile markets or during periods of high market rotation. Actively managed funds can adapt and invest across different sectors or styles, depending on the market cycle.

Evaluating Market Conditions

Market timing plays a crucial role in the success of momentum investing. Momentum funds tend to perform well during bullish trends but can suffer during market corrections or periods of sideways movement.

Market Volatility: If the market experiences increased volatility, momentum funds could see larger drawdowns. This could impact your portfolio negatively if you need liquidity or returns in the short term.

Economic Cycles: Momentum strategies may not work well in economic downturns or recessions. In such situations, actively managed funds are better equipped to navigate through challenging market conditions.

Considering Your Financial Goals

To determine if this fund aligns with your financial objectives, it's important to reflect on your goals. Here’s a framework to guide your thinking:

Long-Term Wealth Creation: If your goal is long-term growth, actively managed funds could offer a better path to achieving this. Momentum funds could play a smaller role in a diversified portfolio, but they may not be suitable as the sole investment.

Risk Tolerance: If you have a lower risk tolerance, actively managed funds with a focus on large-cap stocks or balanced funds might be a better fit. They offer more stability and lower volatility than momentum index funds.

Time Horizon: Momentum investing works well over the short to medium term. However, if you’re investing for the long term, you may benefit more from a portfolio that includes a mix of equity, debt, and actively managed equity funds.

Diversification and Asset Allocation

When building a portfolio, diversification across asset classes is essential. You shouldn’t rely solely on one investment strategy. Here’s how you can think about allocation:

Core Portfolio in Actively Managed Funds: Make sure that your core investments are in actively managed large-cap or flexi-cap funds. These funds provide stability and steady returns over time.

Complementary Exposure to Momentum Funds: If you’re keen on momentum funds, allocate a smaller portion of your portfolio (10% to 20%) to them. This ensures that you're not over-exposed to one strategy.

Balanced Approach: By balancing actively managed funds with a smaller allocation to momentum funds, you reduce risk while still capturing the upside potential of momentum investing.

Risk Factors to Keep in Mind

Momentum investing comes with a set of risks that you should be aware of:

High Volatility: Momentum funds can experience periods of high volatility, especially in uncertain market conditions.

Market Corrections: During market corrections, momentum funds can fall sharply as the stocks they invest in may have been overvalued.

Performance Reversals: Stocks that have been performing well may start underperforming, leading to a decline in fund performance.

Why Regular Funds Are Better than Direct Funds

Investing through regular plans with the guidance of a CFP ensures that you receive professional advice and support. This can lead to better long-term outcomes for a few reasons:

Optimised Fund Selection: A CFP can guide you in selecting funds that match your financial goals and risk tolerance. This optimises your returns over time.

Ongoing Monitoring: A CFP monitors your portfolio regularly and makes adjustments as needed. This proactive approach can help you avoid market pitfalls.

Lower Risk of Emotional Decision-Making: Investing through a CFP ensures that your investment decisions are based on logic and analysis rather than emotions, which can often lead to costly mistakes.

Final Insights

While the Nifty 500 Momentum 50 Index Fund has its merits, it may not be the best fit for every investor. Momentum funds can offer great returns during bullish markets but come with risks that require careful consideration.

Actively managed funds provide more flexibility, better risk management, and the potential for higher returns.

A well-diversified portfolio with a mix of actively managed funds, complemented by a small allocation to momentum funds, may be more suitable for long-term financial growth.

Consulting with a Certified Financial Planner (CFP) ensures that your investment strategy aligns with your financial goals, risk tolerance, and market conditions.

By focusing on a balanced approach, you can optimise your investments for growth while managing risks effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Asked by Anonymous - May 12, 2025
Money
I am 38 years old and self-employed, earning an average of 1.8 to 2 lakhs per month. I have a home loan of 44 lakhs (EMI is 46,000, tenure 15 years). There is no other liabilities. My investments include 11 lakhs in mutual funds, 3 lakhs in fixed deposits, and 1.5 lakh in gold. Should I focus on prepaying the home loan given my irregular income, or keep my investments intact and continue with EMIs?
Ans: You are doing quite well, especially with your investments and controlled liabilities. Your financial discipline is truly appreciable.

You are 38, self-employed, with Rs.1.8 to 2 lakhs monthly income.
Your current home loan is Rs.44 lakhs with EMI of Rs.46,000 for 15 years.
You have Rs.11 lakhs in mutual funds, Rs.3 lakhs in FDs, and Rs.1.5 lakhs in gold.
Your income is irregular, but you have no other liabilities.

Let us now do a 360-degree evaluation of whether to prepay the loan or stay invested.

 

Step-by-Step Financial Assessment
1. Evaluate the Stability of Your Income First
You earn between Rs.1.8 to Rs.2 lakhs per month.

 

But income is irregular. That needs caution.

 

Loan EMI is Rs.46,000 — about 25% of your average income.

 

If income drops in any month, EMI pressure will increase.

 

So we must first ensure EMI is always affordable, without stress.

 

Hence, liquidity is more important for you right now than aggressive loan prepayment.

 

2. Evaluate Your Emergency Reserve
You have Rs.3 lakhs in FD and Rs.1.5 lakhs in gold.

 

That makes it Rs.4.5 lakhs total liquid safety.

 

Your EMI is Rs.46,000, and personal expenses will also be there.

 

Ideal emergency fund for you = 6 to 9 months of expenses + EMI.

 

That is around Rs.6 to Rs.8 lakhs minimum.

 

So current emergency fund is slightly lower than ideal.

 

Please don’t use this for loan prepayment now.

 

3. Assess the Role of Mutual Funds
You have Rs.11 lakhs in mutual funds. That’s a solid step.

Now let’s assess whether to redeem this and prepay loan.

 

Should You Redeem Mutual Funds to Prepay?
Mutual funds, over long term, give better post-tax return than loan savings.

 

Loan interest is 8% to 9%, whereas mutual funds can give 11–13% in long term.

 

Especially if funds are equity-oriented and held for 5+ years.

 

You will also get capital gains tax exemption on Rs.1.25 lakhs LTCG annually.

 

If you redeem funds, you lose growth potential and compounding.

 

That hurts long-term wealth building.

 

So, do not redeem the entire Rs.11 lakhs in mutual funds.

 

4. Disadvantage of Early Loan Prepayment in Your Case
Prepaying early will reduce interest over time, yes.

 

But you may run into cash flow stress in slow months.

 

Once money is used to prepay, it cannot be taken back easily.

 

Liquidity once lost = flexibility lost.

 

Also, income tax benefit under Section 24(b) gets reduced if loan balance drops.

 

So it’s better to maintain balance between repayment and investment.

 

5. Best Strategy for You – A Balanced Approach
Let’s now craft the best plan for you.

 

Maintain Strong Liquidity First
Keep FD and gold untouched.

 

Increase emergency fund to at least Rs.6–Rs.7 lakhs.

 

For that, set aside extra Rs.2.5–Rs.3 lakhs from savings over time.

 

This makes your EMI safe even in low-income months.

 

Continue Your Mutual Fund SIPs Without Stopping
SIPs give long-term growth and beat loan interest in most cases.

 

Don’t stop mutual fund investments to prepay loan.

 

Stay invested. Let wealth compound.

 

Start Small and Periodic Prepayments
Don’t do bulk prepayment now. Do systematic small prepayments.

 

For example, Rs.25,000 to Rs.50,000 extra every 3–4 months.

 

When income is higher, use that surplus to prepay in parts.

 

Target 1–2 bulk part-payments per year.

 

This reduces tenure and interest slowly, without affecting liquidity.

 

Track Your Loan Amortisation Every 6 Months
Use netbanking or get a fresh loan statement every 6 months.

 

Check how each prepayment is reducing principal.

 

Adjust your strategy accordingly.

 

Avoid One-Time Full Prepayment
That would kill your long-term investment compounding.

 

Also removes your income tax benefit under Section 24(b).

 

Stay flexible. You are self-employed.

 

You need cash buffers more than salaried people.

 

Final Insights
Do not do bulk home loan prepayment from mutual funds now.

 

Keep SIPs going and maintain your compounding.

 

Grow your emergency fund to Rs.6–7 lakhs minimum.

 

Use surplus months to make small part-payments towards home loan.

 

This protects your peace and builds wealth at the same time.

 

Reassess in 2–3 years. You may be able to prepay more later.

 

You are already in a good financial position. Your thoughtful approach is praiseworthy.

 

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

...Read more

Ramalingam

Ramalingam Kalirajan  |8334 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 12, 2025

Money
i wish to purchase new car i10, should i purchase the same through own money or should i take a vehicle loan from bank and the money own by my to be kept as FDR or liquid mutual fund
Ans: It’s a good sign that you’re thinking before buying a car. You’re not rushing into it. That shows maturity and smart thinking.

We will now evaluate own money vs vehicle loan — from every angle.

 

Understanding the Nature of a Car Purchase
A car is not an investment.

 

It is a consumption asset, not a growth asset.

 

It depreciates every year. Its value goes down, not up.

 

So the cheaper the total cost, the better for your wealth.

 

Option 1: Use Own Money Fully
Pros

No interest cost. You save on total expenses.

 

You are free from monthly EMI pressure.

 

Car becomes fully yours from day one.

 

No need to deal with bank, forms, hypothecation etc.

 

Cons

Your liquid money reduces.

 

You may not have enough cash for emergencies.

 

Opportunity loss if you had invested that money.

 

Option 2: Take Vehicle Loan & Keep Own Money in FDR or Liquid Mutual Fund
Let’s evaluate this with care.

Vehicle Loan Pros

You can preserve your savings for emergencies.

 

EMI can be budgeted monthly, if income is stable.

 

Some banks offer competitive interest rates.

 

Vehicle Loan Cons

You will pay interest on a depreciating item.

 

Loan adds to your monthly obligations.

 

You must pay insurance, EMI, fuel, and service together.

 

FDR and Liquid Mutual Funds give lower returns than loan cost.

 

So you will likely lose more in interest than you gain.

 

Let's Compare: Interest Rate vs Investment Return
Vehicle loan interest is usually 9% to 11% per year.

 

FDR gives around 6% to 7% before tax.

 

Liquid mutual funds give 6% to 7.5% on average.

 

So you pay more to the bank than you earn from investment.

 

Tax on interest or gains reduces actual return further.

 

This means taking a car loan and investing your own money leads to net loss.

 

Best Option for You: Smart Compromise Approach
Let me share a wise solution.

 

Don’t use full own money. Don’t take full loan either.

 

Instead, pay 70–80% from own funds.

 

Take a small car loan for the remaining 20–30% only.

 

This keeps EMI low and retains some liquidity.

 

You reduce interest cost and also keep Rs.50,000–Rs.1 lakh aside.

 

Park that in liquid fund for any urgent need.

 

Repay this small loan fast in 1–2 years.

 

Only Take a Car Loan If:
Your job income is stable.

 

You already have 3–6 months emergency fund ready.

 

You don’t have big loans running now.

 

You can pay EMI without affecting savings.

 

You commit to close the loan early.

 

Avoid This Mistake:
Never buy a more expensive car because loan makes it “feel affordable.”

 

Loan should not expand your car budget.

 

Whether you buy with loan or cash, pick a simple car within limits.

 

i10 is a wise, middle-ground choice. Good thought.

 

Tax Angle (If Business Use)
If you are using the car for business, vehicle loan interest may be tax-deductible.

 

But for personal use, there is no tax benefit.

 

So do not take loan just for imagined tax saving.

 

Final Insights
A car is a need, not an investment.

 

Using your own money fully keeps things simple and cheap.

 

Taking a full car loan and investing the money gives net negative return.

 

Best option is a split approach — pay major part from own funds.

 

Take small loan only if needed and close it early.

 

Always keep emergency money aside before buying.

 

Avoid emotional buying or overbudget cars.

 

Your financially balanced approach is very appreciable.

 

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

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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