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Ask Mint Money | If you have a housing loan, do not invest in another property

Ask Mint Money | If you have a housing loan, do not invest in another property
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First Published: Thu, Jun 09 2011. 09 08 PM IST
Updated: Thu, Jun 09 2011. 09 08 PM IST
I am 37 years old and my monthly salary is Rs 1.50 lakh along with a bonus of Rs 40,000. I have two kids aged 11 and four years. I pay an equated monthly instalment (EMI) of Rs 22,154 per month on a home loan; the outstanding loan is Rs 22 lakh. I have a health cover of Rs 4.4 lakh and a life cover of Rs 50 lakh. The monthly household expenditure is around Rs 70,000. My assets include 160g of gold, car, a flat, cash Rs 1.7 lakh. My short-term goal is a vacation to the US in 2013 and my long-term goals are retirement, children’s education and marriage. I invest Rs 3,011 in Birla Sun Life Dream Plan and Rs 15,00 and Rs 3,000 towards retirement plans. I plan to invest Rs 5,000 in Tanishq Golden Harvest Offer, Rs 5,000 in gold exchange-traded fund (ETF), Rs 5,000 per month in Public Provident Fund (PPF), Rs 17,500 in equity mutual funds (MFs) and Rs 7,500 in balanced funds. I also want to invest in property and can pay an EMI of Rs 15,000. I want to increase my life cover to Rs 1 crore since I am diabetic. I want to invest Rs 3,000 per month directly in stocks, especially in large-cap funds. Am I on the right track?
-Rajesh Oza
Your current assets (excluding real estate) is on the lower side but is understandable as you are funding a house.
The earning member should be adequately protected in the form of life and health insurance. It is assumed that you have covered your family in the same health cover. However, your life cover is on the lower side. Along with increasing your life cover, consider a cover for your housing loan.
Coming to savings, your potential to save is high—Rs 80,000 per month. Your net savings can be Rs 59,000 after considering your insurance premiums. You can start with opening a PPF, in which you should invest the maximum permissible limit of Rs 70,000 per year.
Since your needs are long-term, you can pick a combination of asset classes that have higher equity exposure. Choose four-five funds including multi-caps, large-caps, mid-caps and balanced funds. HDFC Equity and Fidelity Equity are good in the multi-cap space; HDFC Top 200, DSP BlackRock Top 100, Birla Frontline Equity among large-caps; IDFC Premier Equity, DSP BlackRock Small and Mid cap in the mid-cap space; and HDFC Prudence, Birla Sun Life 95 in the balanced fund category. You can buy a gold ETF and skip buying physical gold. Do monthly investment of about Rs 7,000 in each of the fund you pick. The balance can go in enhancing your term cover.
As far as investing in large-cap stocks is concerned, we prefer and recommend you to go through the MF route. Also, it is better if you stay away from investing in any other property as there is already a housing loan running. Consider investing in property once you are debt-free.
Queries and views at mintmoney@livemint.com
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First Published: Thu, Jun 09 2011. 09 08 PM IST