Hi sir I have one plot,plot value around 40L,i have loan on plot 16.5L.I pay EMI for loan 20000 for 135 months.I decide sell the plot and close the loan and balance amount invest in mutual funds.And can i SIP in mutual funds 20000 for my retirement plan and my children higher education.My son studying 6th and daughter studying 4th standard.I don't have any other home property.My monthly income 65000.It is good or bad.
Ans: Selling your plot to close the loan and invest the balance in mutual funds is a strategic move. This decision reflects a desire for financial clarity and long-term planning.
Three key factors:
Loan Burden: The current EMI of Rs. 20,000 is a significant portion of your monthly income. Selling the plot will eliminate this burden, freeing up cash flow.
Investment Potential: With Rs. 40 lakh from the plot, after closing the Rs. 16.5 lakh loan, you can invest around Rs. 23.5 lakh in mutual funds.
Future Financial Goals: Your primary goals are retirement and children's higher education. Mutual funds are a solid choice for achieving these goals.
Benefits of Selling the Plot
Selling the plot offers several advantages:
Debt-Free Life: Clearing the loan eliminates the financial stress of EMIs. This improves your cash flow and allows you to focus on savings.
Unlocking Capital: The Rs. 23.5 lakh can be invested to potentially grow over time. Real estate can be illiquid, but mutual funds offer better liquidity.
Financial Flexibility: The absence of a loan gives you the freedom to allocate your income toward other financial goals.
Investing in Mutual Funds for Long-Term Growth
Mutual funds are a powerful tool for wealth creation, especially for long-term goals like retirement and education. Here's why:
Diversification: Mutual funds offer exposure to various asset classes. This reduces risk compared to investing in a single asset like real estate.
Professional Management: Funds are managed by experienced professionals. They make informed decisions, aiming for the best returns.
Potential for High Returns: Over a long-term horizon, equity mutual funds can offer significant growth, helping you achieve your goals.
SIP for Consistent Wealth Creation
Starting a Rs. 20,000 SIP is an excellent decision. It brings discipline and consistency to your investment strategy.
Key benefits:
Rupee Cost Averaging: SIPs help in averaging the cost of investment over time. This reduces the impact of market volatility.
Long-Term Growth: Regular investments, even in small amounts, can grow significantly over time. Your SIP can contribute to both your retirement and children's education.
Financial Discipline: SIPs inculcate a habit of regular savings, which is crucial for long-term financial success.
Prioritizing Your Financial Goals
Your son is in 6th grade and your daughter in 4th. Planning for their higher education is critical. Simultaneously, planning for retirement ensures a secure future.
Here's how you can approach this:
Children's Education: Start by estimating the future costs of their higher education. Allocate a portion of your SIP towards this goal.
Retirement Planning: The remaining SIP can be directed towards retirement. The earlier you start, the more your money will compound over time.
Advantages of Mutual Funds over Real Estate
While real estate can appreciate, mutual funds offer several distinct advantages:
Liquidity: Mutual funds are easier to sell compared to real estate. You can access your money when needed.
Flexibility: You can adjust your investments based on market conditions and personal financial needs.
Lower Maintenance: Real estate requires ongoing maintenance and incurs costs. Mutual funds, especially when managed through an MFD with CFP credentials, are hassle-free.
Final Insights
Your decision to sell the plot and invest in mutual funds aligns well with your financial goals. Clearing the loan will give you financial freedom and peace of mind. Investing the balance in mutual funds, particularly through a disciplined SIP, sets you on the path to long-term wealth creation.
Ensure that your investments are aligned with your goals, be it children's education or retirement. Regular monitoring of your portfolio, preferably with a Certified Financial Planner, will help you stay on track.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
