Let me get this clear one more time. In an ideal situation you will live in a rented house and invest all the money that you have in a great business. This business will grow, you will take it public, and, with the new found free money buy a nice house as per your liking.

Since most of us cannot do this..we accept sub optimal solutions.

People read my blog and say “Subra says buying a house is not a good idea” or “Lic policies give poor returns, so it is a bad idea”….this is just half the story.

  1. You live in a rented house, and invest in direct equities and have built a good portfolio – this is second best scenario.
  2. You live in a rented house, and have done good quality SIP and have a CAGR of 16% over the past 17 years
  3. You live in a rented house, and have LIC policies worth Rs. 17 lakhs and about Rs. 8 lakhs in bank fixed deposits
  4. You live in a rented house, and have a bank balance of Rs. 29 lakh

If is obvious that if a person does not know how to invest, he is better off in buying a house!! At least potentially the house can (and most probably will) give emotional satisfaction, and a return higher than Lic policies or money being kept in a bank.

What about those people who keep tons of money in the bank account? Say savings account (too lazy to save in bank fixed deposits) and living in a rented house? MAKES NO SENSE AT ALL. Such people are better off investing in a house so that they can save rent. Bank fixed deposits / savings accounts are one of the worst ways of saving / investing money.

So if you do not wish to invest in equities, you are better off buying a house and even taking LIC policies. Not because it is efficient, but simply because it is better than leaving money in the savings account permanently !!

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  1. sir really super post never seen anything like this before

    most of the people are in category 3 and 4 only and actually most of real estate buying is driven by this majority

  2. sir,
    as i understand, premium for whole life policies (however higher) is fixed at the time of purchase and remains same for the life. but in term insurance, premeium can be revised (obviously raised) by insurer after end of each term, and also insurer may refuse insurance for another term depending upon health and age. normaly how long is the “term” offered by indian insurers for which premium will remain fixed (if at all available).

  3. @Baljit:
    Please also look at both the insurance i.e. term and endowment from the ratio of premium:sum assured. There is a huge difference over there. The increase of premium (if) in case of term insurance is surely compensated by the extremely low premiums at the beginning.

  4. Hello Sirji,
    I have gone through your videos also of retirement planning by shri pattu.
    MY confusion is what are the Debt options for NRIs?
    for longer duration, NRI should go with NRI FD? If not what other options left for Debt part of portfolio for Longer duration?
    I am an MF Investor( sip) as well as park some money in NRI FD. Currently i have surplus liquid in saving a/c and so raise a query.

  5. @Jig:
    PPF may be a better Debt instrument for long term but for that you should already have PPF account as NRI’s are not allowed to open PPF but if you already have one opened before you become NRI you can continue deposit.

  6. @iamnospecial:::
    can we have numbers, as i do not have. let us say some one takes term insuranse at age 25, gets dignosed by BP or heart disease or cancer or ‘god forbids’ anything like that, what will be the numbers.
    will pattu sir guide us

  7. This is the advice needed to most financially illiterate people. But the sad thing is they will never be reading this blog 🙁

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