39-Year-Old Father Seeks SIP Investment Advice for Daughters' Education and Marriage

Ans: You have two daughters, aged 8 and 6, and you want to ensure their future, especially for their education and marriage. Your goal is to accumulate Rs 5 to 6 crore over the next 15 to 20 years through Systematic Investment Plans (SIP). This is a thoughtful and commendable goal, as it reflects your long-term commitment to your daughters' well-being.

Here’s how you can approach this goal in a well-structured, smart, and manageable way.

Understand the Power of SIP
SIP is a powerful and disciplined way to invest. It allows you to invest a fixed amount regularly, providing the benefit of rupee cost averaging and compounding over time. By starting early, you give your investments more time to grow, which works well for your 15 to 20-year horizon.

But remember, achieving a target of Rs 5 to 6 crore will require careful planning, consistent investment, and patience. It’s not just about how much you invest but also where you invest.

Step 1: Split Your Goals – Education & Marriage
It’s best to divide your overall goal into two parts:

Education (10 to 12 years away): Start saving now, so you have a good corpus ready when your daughters are around 18 years old.

Marriage (15 to 20 years away): You have a slightly longer horizon for this, so investments here can be more aggressive.

By splitting the goals, you can allocate your SIPs accordingly. This strategy will allow you to track your progress better and rebalance if needed.

Step 2: Choose the Right Type of Funds
To maximize your chances of reaching Rs 5 to 6 crore, it’s essential to select the right types of funds. Let’s break it down:

1. Equity Mutual Funds (For Long-Term Growth)
Equity funds have historically outperformed other asset classes over the long term. Since your investment horizon is 15 to 20 years, you can afford to take a higher risk for higher returns. Actively managed equity funds, especially in categories like large-cap, flexi-cap, and mid-cap funds, can help you grow your wealth significantly.

Why not Index Funds? While index funds are low-cost, they tend to give average market returns. Actively managed funds, with the right management, can deliver better returns. A Certified Financial Planner can guide you in selecting funds managed by experienced professionals, which can help in outperforming the market over time.

2. Balanced Advantage Funds (For Balanced Approach)
You can also include balanced advantage funds. These funds shift between equity and debt based on market conditions, ensuring a more balanced approach. They reduce the risk in times of market volatility and provide steady returns.

This is a great choice to have in your portfolio for your daughters' education, as the goal is relatively nearer compared to marriage.

3. Debt Funds (For Stability Closer to Goal)
As you approach your goal, say in the last 5 years before you need the money, it’s a good idea to shift some portion of your investments into debt funds. These funds offer stability and protect your corpus from market downturns.

You can start with a small portion in debt funds and increase it gradually as you get closer to the time when you need the money.

Step 3: Plan the SIP Amount
To reach Rs 5 to 6 crore in 15 to 20 years, you will need to invest a significant amount each month. The actual amount will depend on the returns you get from your investments, but a Certified Financial Planner can help you estimate this based on your risk profile and target amount.

You can start with an amount that’s comfortable for you and increase it gradually every year. For example, a 10% step-up in your SIP each year can make a big difference to the final amount. The earlier you start, the smaller the monthly investment required.

Step 4: Diversify Smartly
It’s essential to diversify your investments across different fund categories and asset classes. This reduces the overall risk and ensures that if one part of the market is down, the others can balance it out.

Diversify across sectors (e.g., banking, technology, pharma) within your equity funds to capture growth from different parts of the economy.

Diversify across fund managers to avoid over-dependence on one strategy or style of investing.

Diversification can help you achieve your goal without exposing your investments to unnecessary risk.

Step 5: Use Regular Funds with Professional Guidance
While direct funds seem attractive due to lower costs, investing through a Certified Financial Planner (CFP) using regular funds ensures you get the right guidance. A CFP can:

Help you select funds tailored to your specific goals.

Offer advice on market conditions and whether you need to make adjustments.

Provide periodic reviews of your portfolio and rebalance it when needed.

The extra cost of regular funds is justified by the personalized advice and expertise you get, ensuring you stay on track to meet your financial goals.

Step 6: Monitor and Review Regularly
Once you start your SIPs, you should not simply forget about them. Review your portfolio at least once a year with your Certified Financial Planner. This helps ensure that:

Your investments are performing as expected.

Any changes in your life or financial situation are accounted for.

You are on track to meet your goals, or you need to make adjustments.

Remember, the market will have ups and downs, but staying focused on your long-term goals is key.

Tax Implications
As you invest in mutual funds, it’s important to be aware of the tax implications.

For equity mutual funds, long-term capital gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%, while short-term capital gains (STCG) are taxed at 20%.

For debt mutual funds, both LTCG and STCG are taxed as per your income tax slab. This means you’ll need to plan your withdrawals carefully to minimize tax liabilities.

Final Insights
You’ve taken a significant step by planning for your daughters’ future. With a well-structured investment plan, you can meet your goal of Rs 5 to 6 crore over the next 15 to 20 years. Here’s a quick recap of what to do:

Split your goals into education and marriage for better tracking.

Choose a mix of equity, balanced, and debt funds for diversification.

Start SIPs with an amount you can manage, and increase it yearly.

Work with a Certified Financial Planner to ensure you stay on track.

Review your portfolio regularly and be aware of tax implications.

By following this plan, you’ll be in a strong position to provide for your daughters’ education and marriage, while also growing your wealth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment