I was talking to Rohini, who had just got her commercial pilot licence and begun her first job with an airline. She wanted my advice on investing the monthly surplus from her salary. She had an education loan at 8% interest, with 8 years to run. Her surplus was what remained after the hefty EMI. I told her there was an order to follow. First, pay the fixed EMI on the loan. Second, buy the right insurance. Third, use the balance to repay the loan faster. Investing comes after that. She was shocked. “I thought an investment adviser would tell me where to invest. Instead, you ask me to buy insurance, though you write against it in your columns. And you want me to repay my loan faster.”
After her shock wore off, I explained my position. I have always written against the mis-selling of insurance. Yet the right insurance comes before any investment. Rohini said she had no dependants, so she did not need term insurance. But she herself depended on her income. That income needed protection. She needed two covers: a critical illness policy that pays a lump sum on diagnosis of a listed illness and an accidental disability policy that pays if an accident disables her permanently. That money would replace her lost income. The airline already gave sufficient cover for both risks. It also covered her medical costs. I told her to buy her own medical policy. It is unwise to depend solely on an employer’s policy.
That brought us to step three: repaying the loan faster. Rohini had two fears. The first was liquidity. Investments could be redeemed in an emergency, but could she access money used to prepay the loan? Her lender allowed her to withdraw any amount she had prepaid. She could also build an emergency fund from the surplus before beginning loan prepayment. The fear of missing out (FOMO) came second. Her friends were making returns from all kinds of ideas. She would be stuck with the boring task of repaying a loan.
My response was simple. I asked her if she would borrow at 8% to invest in any idea, however good. She was horrified at the thought. I told her investing her surplus instead of repaying the loan is the same thing. It is borrowing to invest. Repaying the loan early earns her a certain 8%. Equity could earn more over 8 to 10 years, but that return is uncertain. Return can come in bursts, after long spells of losses. She may lose patience and quit at the wrong time. A SIP can be stopped. An EMI cannot. In uncertain times, it is best to have as little committed repayment as possible.
Rohini said her father might clear the loan. Where would she then invest her surplus? Her friends were in crypto, unlisted shares, unregulated startups and IPOs. I told her to avoid such get-rich-quick ideas. She should save 30% of her salary every month. Her living costs and insurance premiums must fit in the rest. She should not wait for the perfect investment. At this stage of her career, the compounding of her savings habit matters more than the compounding of her investments. I suggested a simple passive fund: an index, multi asset or hybrid fund. If choosing was hard, even a bank recurring deposit would do.
Truth be told, Rohini expected an investment adviser to tell her where to invest. But an adviser must look at her financial life, beginning with whether she should invest at all. My advice was boring and gave her no bragging rights. She understood the reasoning and followed it. She bought the right insurance. She cleared the loan from her own income, though her father could have helped, and then started a monthly SIP in a passive multi asset fund. Good advice is like a kandeel on a dark path. It does not dazzle. It lights the next few steps. I wish every reader the same light, and the courage to follow it.
The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor; X: @harshroongta
TRUTH BE TOLD Harsh Roongta
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
(A slightly different version of this column first appeared in the Business Standard on 09 November, 2026)