Do you have enough money to buy a home?

My only investment is in a unit linked insurance plan.

 - Debapriya Roy

Dear Debapriya,

Let me talk about your investments first.

Why have you invested in the ULIP? If you do not have a good answer for that, please actively consider taking 'non-sales' advice for your investment decisions. Normally, people just invest based on the advice of their insurance agents and end up making the wrong investments.

Usually Unit Linked plans are an expensive way to save up.

Where your apartment is concerned, how are you going to fund the downpayment? Do you have any savings?

If you do not have the money, you might be tempted to invest your monthly savings in 'high return' investments. Most people are investing in the stock market because it is currently giving good returns. Lots of them have forgotten (or want to forget) how investors lost their shirts in the 2000 crash.

Please do remember that high returns and high risk go hand in hand. Risk isn't necessarily bad, but make a conscious decision to take the risk, keeping the downside possibility firmly in your mind.

If you do have the money, your current savings are likely to be equivalent to the Equated Monthly Installment for the amount of loan that would go for a Rs 10 lakh loan.

My advice would be to keep the habit of saving (and investing) even after the home is bought and the EMI kicks in. It will be difficult to begin with, so start small… even Rs 500, if not more.

Illustration: Dominic Xavier

Got a question for Devang Shah? Please write to us.

Note: Questions may be edited for brevity. Due to the tremendous response, all queries will not be answered.

Disclaimer: While efforts have been made to ensure the accuracy of the information provided in the content, rediff.com or the author shall not be held responsible for any loss caused to any person whatsoever who accesses or uses or is supplied with the content (consisting of articles and information).