New Delhi, May 25 -- Aditya had recently returned to India after a successful banking career in London. A few months after settling down in Bengaluru, he purchased an apartment in a well-appointed gated community by availing a home loan. Aditya's impressive performance at work earned him a sizeable bonus a year later. Like many salaried professionals, he faced the dilemma of choosing between reducing his loan or investing the bonus.

If Aditya had invested Rs.20 lakh in equity, earning 12% annually over 10 years, his investment would have grown significantly and delivered higher absolute returns than prepaying the loan.

Theoretically, the answer appeared obvious. The choice between loan prepayment and investing boiled down to the differe...