I have taken home loan of 42L in the year 2017 (EMI 33000/Month) for 25Years (300 Months). Due to the continuous increase in the Interest rate, the remaining tenure is keep on increasing and maintaining in 300+ months even after paying the EMI for more than 7 years and Home Loan Principal only 4.5 Lakh is reduced. I am a private company employee of 35 years earning nearly 1Lakh per month and able to save around 15,000 rupees monthly. And with the 15000 monthly savings, i started the following investment/plans from this month 1. I am investing 5000 for Suganya Samriddhi Scheme for my daughter (5years Old). 2. I am contributing 5000 to VPF (My age 35). My existing EPF balance is 5.5Lakh and monthly PF is 4900 deducted. 3. I am making prepayment of 5000 to Home loan principal in addition to monthly EMI. Also i have a Fixed Deposit of 5Lakhs maturing in this year end. I am looking for a expert advise whether the above investment plan is good enough to get benefit in the longer run or any other better safe investment option is available. Please note my year on year annual increment is very less approximately 5000 only.

Ans: It's great that you and your wife are thinking ahead and planning for your future. Let's dive into your current investment strategy and how you can tweak it if you decide to take on a home loan. Your current investments are impressive, but there's always room for improvement.

Assessing Your Current Investment Strategy
Mutual Funds and SIPs
You invest Rs 1 lakh monthly in diversified funds via SIPs. This is a solid strategy as it allows you to invest regularly and benefit from rupee cost averaging. SIPs are great for disciplined investing and mitigating market volatility.

Mutual funds are excellent for growth and diversification. With Rs 50 lakhs already in mutual funds, you have a substantial portfolio. Diversification reduces risk and enhances returns. However, it's crucial to periodically review and rebalance your portfolio to align with your goals and market conditions.

Recurring Deposits (RDs)
Investing Rs 20k monthly in RDs is a good move for stability. RDs provide guaranteed returns and are a safe investment. However, the returns are relatively low compared to other options. You might want to consider reducing your RD investments and redirecting some funds into more growth-oriented investments.

Fixed Deposits (FDs)
You have Rs 25 lakhs in FDs. FDs are safe but offer lower returns compared to mutual funds. It's wise to have some amount in FDs for emergency liquidity, but having too much can limit your growth potential. Consider maintaining a balance between safety and growth.

National Pension System (NPS) and Provident Fund (PPF)
You contribute Rs 50k annually to NPS and Rs 1 lakh to PPF. Both are excellent for long-term retirement savings. NPS offers market-linked returns and PPF provides guaranteed returns with tax benefits. Your employer’s contribution to NPS and EPF adds to your retirement corpus, which is great.

Genuine Compliments
You're doing an impressive job with your investments. Investing regularly through SIPs and maintaining a diversified portfolio is commendable. Planning for retirement with NPS and PPF shows your foresight. Keep up the good work!

Suggested Changes in Current Strategy
Portfolio Review and Rebalancing
Regularly review your mutual fund portfolio. Assess the performance and make changes if needed. Focus on a mix of large-cap, mid-cap, and small-cap funds. Reduce the number of funds if you have too many, to avoid over-diversification.

Increasing Equity Exposure
Consider increasing your equity exposure for higher growth. Redirect some of your RD and FD investments to mutual funds. This will enhance your portfolio’s growth potential over the long term.

Emergency Fund
Ensure you have an emergency fund covering 6-12 months of expenses. This provides a safety net and prevents you from dipping into your investments during emergencies.

Preparing for a Home Loan
Impact on Monthly Investments
An EMI of Rs 80k will significantly impact your monthly cash flow. Here’s how you can adjust your investments:

Reducing SIP Amounts
You may need to reduce your SIP investments. Prioritize your essential SIPs and consider reducing contributions to less critical ones. This helps in managing your cash flow without stopping investments entirely.

Prioritizing High-Growth Investments
Focus on high-growth investments to maximize returns. Consider reducing contributions to RDs and FDs, as they offer lower returns. Redirect these funds to mutual funds with better growth potential.

Budgeting and Expense Management
Create a detailed budget to manage your expenses. Identify areas where you can cut back to free up funds for your EMI. This helps in maintaining a balance between investing and meeting your financial obligations.

Advantages of Mutual Funds
Professional Management
Mutual funds are managed by experts who make informed decisions. They analyze markets and select the best securities for the fund.

Diversification
Mutual funds offer diversification, reducing risk by investing in a variety of securities. This helps in balancing risk and return.

Liquidity
Mutual funds are relatively liquid. You can redeem your investment whenever needed, providing flexibility.

Systematic Investment Plan (SIP)
SIPs help in disciplined investing. They allow you to invest regularly, reducing the impact of market volatility.

Power of Compounding
Investing in mutual funds benefits from the power of compounding. Reinvesting returns helps your investment grow exponentially over time.

Disadvantages of Index Funds
Limited Flexibility
Index funds strictly follow the index, offering no flexibility. They can't adapt to market changes.

Average Returns
Index funds aim to match the index returns, which are average. Actively managed funds aim to outperform the index.

Benefits of Actively Managed Funds
Potential to Outperform
Actively managed funds aim to outperform the index. Fund managers make strategic decisions to maximize returns.

Flexibility
Fund managers can adapt to market conditions. They can select or avoid securities based on market trends.

Final Insights
You have a strong investment strategy and a clear vision for your future. With a few adjustments, you can enhance your returns and achieve your goals. Consider reviewing your mutual fund portfolio, increasing equity exposure, and maintaining an emergency fund.

If you decide to take on a home loan, adjust your investments to manage the EMI without compromising your financial goals. Prioritize high-growth investments and create a detailed budget to manage your expenses.

Keep up the disciplined investing approach and regularly review your portfolio. This ensures your investments are aligned with your goals and market conditions.

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

Ans: Current Financial Snapshot
You earn Rs. 90,000 per month.

Planning Rs. 50,000 EMI on Rs. 50 lakh loan.

No liquid savings after down payment.

Two children aged 9 and 7.

Term insurance of Rs. 40 lakhs (Rs. 5,500 premium).

Mediclaim premium Rs. 22,000 yearly.

LIC child policy Rs. 1,500 monthly.

SIPs: Rs. 2,000 + Rs. 2,500 monthly.

You are sincere with goals. Now, let’s build a step-by-step financial structure.

First Focus: Loan + Liquidity Stability
You are opting for a 50k EMI on a 90k salary.
That is 55% of income, which is risky.

Keep EMI below 40% of income in future, if possible.

Start creating Rs. 1.5 lakh emergency fund slowly.

Use Recurring Deposit or Liquid Mutual Fund.

Start with Rs. 3,000 per month toward emergency fund.

You must protect family from sudden financial stress.

LIC Policy Needs Immediate Attention
LIC child policy is not effective for wealth creation.

They offer low returns and poor liquidity.

These are investment cum insurance plans.

Surrender the LIC policy and switch to mutual funds.

Redirect that Rs. 1,500 into a child goal SIP.

This change alone will boost long-term growth significantly.

Insurance Protection Needs Fixing
Your term cover is Rs. 40 lakh only.

That’s very low for a family with two school-age children.

Increase term cover to Rs. 1 crore minimum.

Premium will still be affordable.

Stick to pure term plan only.

No need for ULIP, endowment, or money-back policies.

Your mediclaim is good at Rs. 22,000.
Please confirm if it covers entire family for Rs. 10–20 lakhs.

If not, buy family floater policy separately.

Children’s Education Planning
You need dedicated plans for two kids’ higher education.

They’ll need funds in next 8 to 10 years.

Start SIPs separately in child-focused hybrid mutual funds.

Allocate at least Rs. 3,000 per child per month.

These SIPs should increase yearly.

Shift these funds to debt 2–3 years before education begins.

Avoid using real estate or LIC for child’s education goals.

Rebuilding Investment Structure
You are already investing Rs. 4,500 per month in SIPs.

Good start. But fund selection needs improvement.

Avoid thematic or sectoral funds like defense or manufacturing.

They are high risk, not suitable for core portfolio.

Shift to diversified equity funds and hybrid funds.

Proposed SIP Structure (Rs. 6,000 per month):

Rs. 2,500 in flexi-cap fund.

Rs. 2,000 in aggressive hybrid fund.

Rs. 1,500 in multi-asset fund.

Increase SIP as your salary grows.

Do all investments via Certified Financial Planner using regular plans.

Why Not Index Funds or Direct Plans?
Index funds only give market average return.

They don’t protect in market falls.

You need active management to beat inflation and grow corpus.

Direct funds require full monitoring by you.

They offer no guidance or review.

Regular plans via a Certified Financial Planner with MFD license offer:

Ongoing monitoring

Timely rebalancing

Goal alignment

Peace of mind

Debt Management Tips
You wish to prepay your home loan early. Good intention.

Do not rush repayment in initial years.

Focus on building emergency fund first.

Once you have Rs. 2–3 lakh in hand:

Start partial prepayment once a year.

Target one EMI worth (Rs. 50,000) every year.

Prepay only when basic financial goals are on track.

Monthly Cash Flow Restructuring
Break-up suggestion for your Rs. 90,000 salary:

Rs. 50,000 – EMI

Rs. 5,000 – Household needs

Rs. 8,000 – Children school fees and activities

Rs. 3,000 – Emergency fund saving

Rs. 6,000 – SIP (investments)

Rs. 2,000 – Insurance (term + health)

Rs. 16,000 – Buffer, future SIP top-up, or bonus prepayment

As salary rises, increase SIP first, not lifestyle cost.

Must-Do Actions This Year
Increase term insurance to Rs. 1 crore.

Start monthly saving for emergency fund.

Surrender LIC after checking surrender value.

Use SIPs for child education, not insurance.

Avoid sector funds like defense, manufacturing.

Do not invest in annuities.

Get insurance and investment advice only from CFP.

Tax Planning Strategy
Use following wisely:

Rs. 1.5 lakh under Section 80C via EPF, PPF, SIP (ELSS), or term insurance

Rs. 25,000 for health insurance under Section 80D

NPS can help save Rs. 50,000 more under 80CCD(1B), later

Focus on wealth creation, not just tax saving.

Retirement Planning Begins Later
Don’t worry about retirement corpus now.

Focus on:

Securing family with term and mediclaim

Funding children’s future

Closing home loan over 10 years

Building Rs. 10 lakh mutual fund corpus first

After age 45, shift focus to retirement investing.

Year-Wise Action Roadmap
Year 1:

Build Rs. 1.5 lakh emergency fund

Start SIPs for kids’ education

Get Rs. 1 crore term cover

Reallocate SIP from thematic to hybrid/flexicap

Review and exit LIC policy

Year 2:

Do first loan prepayment (Rs. 50,000)

Raise SIP by 10–15%

Keep Rs. 1.5 lakh in liquid funds as reserve

Year 3:

Check kids’ school and tuition expenses

Start planning for their higher education goals

Review all funds annually with CFP

Finally
You are managing responsibilities well.

You are ready to build a stronger plan.

Start with insurance fix, SIP structure, and goal mapping.

Don’t waste money on ULIP, child plans, or annuities.

Avoid direct mutual funds or index funds.

Work with a Certified Financial Planner for proper handholding.

Your kids will thank you later.

Stay focused, consistent, and simple.

Your wealth journey is very much on track.

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