How to manage illiquid investments during uncertainty

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Rohan is 30 years of age. He is a hospitality professional, working with a well-esteemed hotel chain for the past seven years. Rohan was going on an overseas assignment for five years. He received a handful amount of allowance so, he decided to buy an apartment.

The main reason behind buying an apartment was- it would lead to forced savings. But the company in which Rohan was working was adversely impacted by the brutal pandemic, with many lay-offs happening. Rohan was already looking for a different job, but the industry had muted recruitments.

He found out that his EMI payments were becoming unmanageable. He had invested money in a PPF account for the past seven years and some in equity mutual funds. Rohan has been asking for monetary help from his family and relatives and is also looking for financial advice to understand what he should have done differently.

According to expert suggestion, Rohan should assess whether it is realistically possible to get a home loan during job uncertainty. He can exit from his illiquid investments, like the real estate investment (house in India), to release the stress on his income.

However, Rohan should try to take care of his EMI payments for a few months before exiting from the investments.

If he holds the assets for at least three years, he can get lower tax benefits on long-term capital gains.

The other options available are taking a loan from his family members or relatives, selling his equity mutual fund investments, and taking a loan from the PPF account to generate the funds required. He can use the premium earned from the sale of his apartment to make investments that are suitable for his current income profile.

Rohan made the mistake of committing to a long-term and inflexible investment before even stabilizing his income and savings. Rohan should invest money from current income and saving estimates because of uncertainty in income.

The investments should be flexible enough to allow him to discontinue or take a break in making investments if there is a shortfall of savings and income. He should do this by avoiding penalties, cancellations, or affecting the current value of the investment.

In case there is an urgent need for funds, he should be in a position to withdraw or liquidate his investments. He should also assess if the potential investments help him meet his basic requirements until he receives a degree of assurance to plan for his long-term investment options such as real estate investment abroad.

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