Home > Money > Question
Need Expert Advice?Our Gurus Can Help

Should I Invest in ULIPs and Mutual Funds for My Daughters' Education and Marriage?

Ramalingam

Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 18, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jul 14, 2024Hindi
Listen
Money

Hi Sir, I am 43 years, i am working in dubai. I have 3 daughters and i want to save more for my daughters education and marriages.. One of my friend suggested to invest in ULIP and i started to investing annaully 255,000 from 2022 (yearly 45k for term insurance, rest money invested in stocks). Could you please guide me, investing in ULIP is good option and i can get good rerurn if i hold for 15-20 years... Also please advise me about the mutual fund investment.. i am planning to invest 5lakhs (50k lumpsum in 10 mutual funds) for 10-15 years... Is this right way to invest, pls guide me the right way ti invest in MF

Ans: It’s commendable that you are focused on saving for your daughters' education and marriages. Let's review your current investments and future plans to provide comprehensive advice.

Current Financial Overview
Age: 43 years old

Location: Dubai

Dependents: Three daughters

Current Investments:

ULIP: Annual investment of Rs. 255,000 (Rs. 45,000 for term insurance, rest in stocks) since 2022
Future Investment Plans: Planning to invest Rs. 5 lakhs (Rs. 50,000 lump sum in 10 mutual funds) for 10-15 years

Good Remarks
Future Planning: Prioritizing your daughters' education and marriages is admirable.

Investment Awareness: Seeking guidance to optimize your investments is a positive step.

Assessment of Current ULIP Investment
ULIP Features
Combination of Insurance and Investment: ULIPs provide both life cover and investment opportunities.

Lock-in Period: ULIPs typically have a lock-in period of 5 years.

Disadvantages of ULIPs
High Charges: ULIPs often have higher charges compared to mutual funds. These include premium allocation, policy administration, and fund management charges.

Lower Returns: The charges can significantly reduce the overall returns. ULIPs may not perform as well as mutual funds.

Recommendation on ULIPs
Evaluate Continuation: Assess the performance and charges of your ULIP. Consider switching to mutual funds if the charges are high and returns are unsatisfactory.
Suggested Mutual Fund Strategy
Benefits of Mutual Funds
Professional Management: Managed by experienced fund managers.

Diversification: Spreads risk across various sectors and companies.

Flexibility: Offers different schemes to match your investment goals and risk tolerance.

Recommended Approach
Avoid Too Many Funds: Investing Rs. 50,000 in 10 mutual funds is excessive. It dilutes the benefits of diversification and becomes hard to manage.

Focused Investment: Instead, choose 3-4 well-performing mutual funds.

Suggested Mutual Fund Categories
Equity Mutual Funds
Large-cap Funds: These invest in large, stable companies. Suitable for long-term growth with moderate risk.

Mid and Small-cap Funds: These invest in medium and small-sized companies. Offer higher growth potential but with higher risk.

Debt Mutual Funds
Debt Funds: Invest in fixed income securities. Suitable for stability and regular income.

Balanced Funds: Mix of equity and debt. Offers moderate growth with lower risk.

Investment Strategy
Lump Sum vs. SIP
Lump Sum Investment: Can be beneficial if invested in a growing market. However, it’s riskier due to market volatility.

SIP (Systematic Investment Plan): Invest a fixed amount regularly. Helps in averaging the purchase cost and mitigates market timing risk.

Suggested Investment Plan
For Rs. 5 Lakhs Investment
Equity Funds: Invest Rs. 3 lakhs in 3 equity mutual funds (Rs. 1 lakh each). Choose large-cap, mid-cap, and small-cap funds.

Debt Funds: Invest Rs. 2 lakhs in 2 debt mutual funds (Rs. 1 lakh each). Choose funds with a good track record.

Systematic Investment Plan (SIP)
Monthly SIP: Consider starting SIPs in these funds. It helps in building wealth over time and reduces risk.
Financial Goals Planning
Daughters' Education and Marriages
Separate Fund: Create dedicated funds for each goal. This helps in better tracking and management.

Long-term Horizon: For goals 10-15 years away, focus on equity mutual funds for higher returns.

Risk Management
Insurance: Ensure adequate health and life insurance coverage. It secures your family’s financial future.

Emergency Fund: Maintain an emergency fund covering 6-12 months of expenses.

Tax Planning
Tax-saving Investments: Utilize options like ELSS to reduce taxable income and grow wealth.

Efficient Filing: File your taxes accurately and seek professional help if needed.

Final Insights
Regular Review: Periodically review and rebalance your portfolio to align with your goals.

Professional Guidance: Consult a Certified Financial Planner for tailored advice and strategies.

Stay Informed: Keep learning about personal finance and stay updated on market trends.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 12, 2024Hindi
Money
Hello All, Hope this finds you well and healthy. I am 31 year old and working in MNC. My monthly income is 1.04L per month. Currently I am investing 20K in mutual funds (8k elss 12k (mid small and large). Yearly I invest 50k in NPS + 10k in PPF + HEALTH INSURANCE+ 38K TERM PLAN. My monthly expense is almost 50-60k. I seek help here, how shall I plan my future investments. Is investing in ULIP or market linked plans such as HDFC, Tata AIA capital guarantee solution. I am looking for down the line after 10-12 year I have sufficient amount for child further education or for buying home.
Ans: Your proactive approach towards financial planning is commendable, and you are on the right track with diversified investments. Let's delve deeper into optimizing your future investments to ensure you achieve your financial goals, including your child's education and buying a home.

Current Financial Overview
At 31, you have a solid foundation with a monthly income of Rs 1.04 lakh. Here's a breakdown of your current investments and expenses:

Mutual Funds: Rs 20,000 (Rs 8,000 in ELSS, Rs 12,000 in mid, small, and large-cap funds)
NPS: Rs 50,000 annually
PPF: Rs 10,000 annually
Health Insurance and Term Plan: Rs 38,000 annually
Monthly Expenses: Rs 50,000 to Rs 60,000
Mutual Funds: A Strong Foundation
Your current investment in mutual funds is well-balanced. ELSS provides tax benefits under Section 80C, while mid, small, and large-cap funds offer growth potential.

Benefits of Your Current Mutual Funds
Tax Efficiency: ELSS funds reduce your taxable income.
Growth Potential: Mid, small, and large-cap funds diversify risk and potential returns.
Flexibility: You can adjust contributions based on market conditions and financial goals.
Evaluating ULIPs and Market-Linked Plans
ULIPs (Unit Linked Insurance Plans) and market-linked plans like HDFC and Tata AIA capital guarantee solutions offer both insurance and investment. However, it's essential to understand their pros and cons before investing.

Pros of ULIPs and Market-Linked Plans
Dual Benefits: ULIPs provide insurance and investment under one plan.
Tax Benefits: Premiums paid may qualify for tax deductions.
Flexibility: You can switch between equity and debt options based on market conditions.
Cons of ULIPs and Market-Linked Plans
High Costs: ULIPs often have higher charges compared to mutual funds, affecting returns.
Lock-In Period: Typically, ULIPs have a lock-in period of five years, reducing liquidity.
Complexity: Understanding charges and benefits of ULIPs can be challenging.
Prioritizing Financial Goals
Focusing on your child's education and buying a home requires careful planning. Here's a step-by-step approach to help you achieve these goals.

Step 1: Define Clear Goals
Child's Education: Estimate future education costs and timeframe.
Buying a Home: Determine the budget and location for your future home.
Step 2: Assess Your Risk Tolerance
High Risk Tolerance: Invest more in equity mutual funds for higher returns.
Moderate Risk Tolerance: Maintain a balanced portfolio with equity and debt funds.
Low Risk Tolerance: Focus on debt funds and fixed income instruments.
Step 3: Optimize Existing Investments
Mutual Funds: Continue investing in diversified mutual funds.
NPS: Increase contributions for long-term retirement benefits.
PPF: Consider maxing out your PPF contributions for stable returns and tax benefits.
Adding New Investment Options
To further diversify your portfolio and enhance returns, consider these additional investment options.

Systematic Investment Plans (SIPs)
Regular Investment: SIPs ensure disciplined investing with regular contributions.
Rupee Cost Averaging: Investing at different market levels reduces the impact of market volatility.
Flexibility: Adjust SIP amounts based on financial goals and market conditions.
Actively Managed Funds
Professional Management: Fund managers actively select securities to outperform the market.
Strategic Adjustments: Managers can adjust the portfolio based on market trends and economic conditions.
Potential for Higher Returns: Skilled managers may achieve higher returns compared to index funds.
Debt Funds
Stable Returns: Debt funds provide regular income with lower risk compared to equity funds.
Diversification: Including debt funds reduces overall portfolio risk.
Liquidity: Debt funds offer better liquidity than fixed deposits or ULIPs.
Planning for Child's Education
Education costs are rising, and planning early ensures you can meet future expenses without stress.

Step 1: Estimate Education Costs
Current Costs: Research current education expenses for your preferred institutions.
Inflation: Account for inflation when estimating future costs.
Timeframe: Determine the number of years until your child starts higher education.
Step 2: Create an Education Fund
Equity Funds: Invest in equity mutual funds for long-term growth.
Child-Specific Plans: Consider child education plans with benefits tailored to education funding.
Regular Contributions: Set up SIPs to build a corpus over time.
Planning for Buying a Home
Buying a home requires substantial financial planning and saving. Here's a structured approach to achieve this goal.

Step 1: Determine Your Budget
Location and Size: Decide on the location and size of the home you wish to buy.
Down Payment: Calculate the down payment required and monthly EMIs you can afford.
Additional Costs: Consider additional costs like registration, maintenance, and property tax.
Step 2: Build a Home Purchase Fund
Equity Funds: For a 10-12 year horizon, equity funds can provide significant growth.
Debt Funds: Include debt funds for stability and lower risk.
Recurring Deposits: Consider recurring deposits for regular savings with fixed returns.
Insurance and Emergency Fund
Ensuring adequate insurance coverage and maintaining an emergency fund are essential components of financial planning.

Health Insurance
Adequate Coverage: Ensure your health insurance covers potential medical expenses.
Regular Review: Periodically review your coverage to adjust for inflation and changing needs.
Top-Up Plans: Consider top-up health insurance plans for additional coverage.
Term Insurance
Adequate Sum Assured: Ensure your term insurance covers your family’s future financial needs.
Regular Review: Update your term plan as your financial responsibilities grow.
Riders: Consider adding riders like critical illness for comprehensive coverage.
Emergency Fund
Three to Six Months: Maintain an emergency fund covering 3-6 months of living expenses.
Liquid Assets: Keep the fund in liquid assets for easy access during emergencies.
Regular Contribution: Contribute regularly to ensure the fund remains adequate over time.
Avoiding Common Investment Pitfalls
Staying aware of common pitfalls helps protect your investments and achieve your financial goals.

Avoid High-Cost Investments
High Charges: Avoid investments with high charges that erode returns, like certain ULIPs.
Hidden Fees: Be aware of hidden fees in investment products.
Diversify Your Portfolio
Single Asset Risk: Avoid concentrating investments in a single asset class.
Balanced Approach: Maintain a mix of equity, debt, and other instruments.
Regular Review and Rebalance
Performance Review: Regularly review investment performance to ensure alignment with goals.
Rebalancing: Rebalance your portfolio to maintain the desired asset allocation.
Final Insights
Your current financial strategy is commendable, showing a well-diversified approach. To optimize your investments for future goals like child education and buying a home, consider increasing contributions to equity mutual funds and maintaining a balanced portfolio. Avoid high-cost investments like ULIPs unless necessary for specific benefits. Regularly review and adjust your portfolio with the help of a Certified Financial Planner to stay on track. Your proactive approach today will ensure a secure and prosperous future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7014 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 26, 2024

Asked by Anonymous - Jul 18, 2024Hindi
Listen
Money
Hi,sir I am 42 years old, i have savings on pf 6 lakhs from past 15 years till now,invested o. Farm land around 50 lakhs for child ,loan amount is 12 lakhs,and other investment like ulip plan for 10 years so plz suggest is ulip ix better or mf or dorect etf on equity and for the age of 60 per month 1.5 lakhs required suggestion plz suggest ..
Ans: You are 42 years old and have made some significant investments.

Let's assess your financial situation:

Provident Fund Savings: Rs 6 lakhs
Farm Land Investment: Rs 50 lakhs
Outstanding Loan: Rs 12 lakhs
ULIP Plan: Active for 10 years
Your goal is to have a monthly income of Rs 1.5 lakhs at age 60.

Evaluating Current Investments
Provident Fund (PF)
Pros: Safe, guaranteed returns, tax benefits.
Cons: Returns may not outpace inflation.
Farm Land
Pros: Potential for significant appreciation.
Cons: Illiquid, uncertain returns, maintenance costs.
ULIP Plan
Pros: Insurance coverage and investment combined.
Cons: High fees, lower returns compared to mutual funds.
Disadvantages of Direct Funds and ETFs
Direct Funds: Require more active management and expertise. May lead to emotional and rash decisions.
ETFs: Mimic the market, leading to average returns. Lack professional management.
Benefits of Regular Mutual Funds
Professional Management: Expert fund managers handle your investments.
Diversification: Spread risk across various sectors.
Potential for Higher Returns: Actively managed funds aim to outperform the market.
Suggested Investment Strategy
Debt Management
Step 1: Focus on repaying your outstanding loan of Rs 12 lakhs.
Step 2: This will free up funds for investment and reduce interest costs.
Building a Diversified Portfolio
Step 1: Shift focus from ULIPs to mutual funds. Surrender ULIP if it is not performing well.
Step 2: Invest in a mix of large-cap, mid-cap, and flexi-cap mutual funds.
Increasing SIP Contributions
Step 1: Start or increase SIPs in mutual funds. Aim for a substantial monthly contribution.
Step 2: Regular SIPs help in rupee cost averaging and build a disciplined savings habit.
Retirement Planning
Step 1: Calculate the required corpus for a monthly income of Rs 1.5 lakhs at age 60.
Step 2: Regularly invest in mutual funds and PPF to build this corpus.
Insurance Planning
Step 1: Ensure adequate life insurance coverage. Term insurance is cost-effective.
Step 2: Secure health insurance to cover medical expenses in retirement.
Regular Review and Adjustment
Step 1: Regularly review your investment portfolio. Ensure it aligns with your goals.
Step 2: Adjust your investments based on market conditions. Consult with a Certified Financial Planner for guidance.
Final Insights
Your goal of having a monthly income of Rs 1.5 lakhs at age 60 is achievable. With disciplined savings and smart investments, you can secure a bright financial future for your family. Focus on repaying your loan, shifting to mutual funds, and regularly reviewing your investments.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
Ravi

Ravi Mittal  |414 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 13, 2024

Asked by Anonymous - Nov 04, 2024
Relationship
my gf was physical(intercourse) just for once with her ex and her ex cheated on her she just had a 2 month relationship with her ex. and after that around just after a month we came in relationship and its been 2 months we are in a relationship we both go to same college but due to house problem she doesn't attend classes basically we are in a long distance relationship and she still remember him and when she goes to places where she meet her ex she still have flashback She is not fully with me even when i just ask her for a normal kiss she refuses and tells me what so hurry but when i asked her does she want to stay with me she told me yes i want to stay with you and she is ready to marry me as well when time comes she even told me that timely she will have feelings for me And for me all this is new this is my first relationship what should i do?
Ans: Dear Anonymous,
Refusing for a kiss isn't as concerning as her saying she will have feelings for you. Not everyone is ready for intimacy at the same time in all their relationships. As I mentioned earlier, there can be several reasons for this behavior. Please have an open conversation with her. Let her know that her behavior is bothering you and you want some clarity. If she still continues to say the same thing, you have the option to rethink the relationship.

I understand that you are feeling disturbed; it's not easy being on the receiving end. Please feel free to pick yourself first. You deserve someone who loves you completely.

Best Wishes.

...Read more

Ravi

Ravi Mittal  |414 Answers  |Ask -

Dating, Relationships Expert - Answered on Nov 13, 2024

Asked by Anonymous - Nov 07, 2024Hindi
Listen
Relationship
I am 28, will be engaged in 3-4 months. It's an arranged marriage. I have met the girl one time, that too she was accompanied with her parents as her family is very conservative. We spoke privately for about half an hour. I know it's still not enough but I was able to have a good conversation. She was nervous at first but I made her feel comfortable and it was then time well spent. She is a sweet girl, even my maa papa like this girl but on the other hand, I am also getting worried as the days are coming near. Sometimes I feel like postponing the event. Is this normal? I also fear of things that happens in nowadays like getting divorce, extra marital affairs, alimony etc. What if she finds a better partner after marriage? Will she leave me? Due to this I cannot have proper sleep recently. Any suggestions to calm my nerves?
Ans: Dear Anonymous,
Many people get cold feet before getting married. It is very normal. All your questions are valid but you need to understand that in every relationship, it all comes down to trust. Whether you marry this woman or someone else, you have to trust her. And no one can really tell what the future holds. So we focus on the present and hope for the best.

I suggest speaking to your would-be partner a little more in the meantime. Getting to know her will put these doubts to rest. I'm sure she is equally concerned about what kind of person you are. Moreover, it is always a good idea to get to know each other better before committing for a lifetime. And, in case, you still think you need to postpone the event, do not shy away from doing so. It is better to take some time and make the right decision than to make a wrong decision in a hurry.

Hope this helps.
Best Wishes.

...Read more

Dr Shakeeb Ahmed

Dr Shakeeb Ahmed Khan  |123 Answers  |Ask -

Physiotherapist - Answered on Nov 13, 2024

Asked by Anonymous - Sep 15, 2024Hindi
Listen
Health
Hi sir , Iam male 27 years planning to reduce my current weight of 86KG hence planning to hit the gym. Iam concerned of abdominal fat. I left gym 3 yrs back when my weight was average 69kgs. However due to no physical activity weight increased. Now iam planning for reducing weight and also improve my strength with good muscular lean body not bulk. Please guide me sir thanks
Ans: It’s wonderful that you’re enthusiastic about getting back into the gym to work towards weight loss and a lean, toned physique! As a physiotherapist, I suggest scheduling regular check-ins with a physiotherapist to monitor your progress and make any necessary adjustments to your exercise routine. To effectively lose fat, particularly around the abdomen, while building muscle, try a balanced approach that incorporates both cardio and strength training. Start with 20-30 minutes of moderate-intensity cardio—like brisk walking, cycling, or jogging—three to five times per week to increase calorie burn. For strength training, focus on compound exercises such as squats, lunges, push-ups, and rows, with three sessions per week. Begin with lighter weights, increasing gradually as your strength builds, and focus on good form to develop lean muscle without bulk.

Including core exercises, like planks, Russian twists, and leg raises, will help to strengthen and tone your abdominal muscles; however, remember that fat loss from specific areas requires overall body fat reduction. A high-protein, balanced diet will be crucial for supporting muscle growth and managing hunger, so aim to reduce processed foods and sugars. Consistency is essential—maintain a regular exercise schedule, and ensure you have rest days for recovery. With dedication, you’ll see steady improvements over time. Best of luck, and don’t hesitate to reach out if you need further guidance!

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x