Equities Can Beat Inflation Over Long Term

Queries

Venkatesh Nair, email

I am 23 years old and just started working. I want to invest in mutual funds aggressively, but my family is asking me to invest in fixed-income instruments, like post office schemes and bank fixed deposits (FD). How should I allocate my investment in conservative instruments and equities? Please suggest.

At 23, you should focus on building wealth by allocating 70-80 per cent of your investments to equity mutual funds for higher returns. Use the remaining 20-30 per cent for conservative options like FDs or post office schemes to address family concerns. However, first start with an emergency fund equivalent to six months’ expenses in a savings bank account or liquid fund for medical or other exigencies.

Help your family understand that equity investments can beat inflation over time. Begin with systematic investment plans (SIPs) in safer funds like large-cap or balanced funds and gradually increase amounts as your income grows.

So, define your goals, keep the portfolio diversified, and prioritise equity for long-term growth.

Col Sanjeev Govila (Retd), Certified Financial Planner, CEO, Hum Fauji Initiative

Akash Malik, email

I am planning to buy an apartment and have shortlisted one in Pune. The developer is offering a few complimentary modifications such as wooden flooring, a modular kitchen, and electronic appliances like air-conditioners. Should I go for it, or are these offers not really worth considering?

It is common for developers to offer freebies especially during festive seasons or when closing a deal. While these complementary offers can be appealing, the decision to buy an apartment should be based on whether it meets key needs such as size, location, construction quality, amenities, and budget.

All freebies are worth considering only after these essentials are met. Some additions, like structural changes in the apartment or interior upgrades can be useful since the developer can integrate them during construction. It will save your time and effort in the future, if you want the upgradation.

However, assess each item’s actual value and the need for you. If it is not essential, negotiate for an equivalent cash discount instead.

Akhil Saraf, Founder and CEO, Reloy, a Proptech firm

Gajanan P, email

I took a home loan of Rs 85 lakh three years ago for 20 years and have been paying the equated monthly instalments (EMIs) regularly. Recently, I exercised my Employee Stock Ownership Plans (ESOPs) and received Rs 13 lakh, which I want to use to repay part of my loan. How should I proceed, and how will it affect my loan? I do not want to reduce my EMIs, as I can afford to pay a higher amount.

In the case of a home loan, you can make a prepayment without incurring a penalty. You can do it either online (if your lender provides the facility) or offline (by visiting the branch and paying via cheque).

A partial prepayment reduces your outstanding principal, which can either reduce your loan tenure or lower your EMI. If you wish to keep the EMI unchanged, the tenure will be reduced instead.

As you want to increase your EMI, the lender may ask for an updated income proof and your bank statements before approving the change in repayment conditions. After evaluation, they will adjust your EMI accordingly.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd