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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 08, 2025

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 - Aug 07, 2025Hindi

Hi, I am 43yr individual planning to invest my 6.5 lakh in mutual funds as lumpsum and monthly 15k as sip. I want this fund to be useful for my childs education in next 8 years. Please help me how should I diversify my funds and in to which ones? Thankyou.

Ans: You have taken a very thoughtful step for your child’s future. Planning eight years early gives you enough time to build a strong education corpus. Your idea of putting Rs. 6.5 lakh as lumpsum and Rs. 15,000 monthly as SIP is very practical. Let me share a 360-degree roadmap.

» Importance of Goal Based Investing
– Child education is a defined goal with fixed timeline.
– Goal based planning removes confusion about where to invest.
– It also helps in keeping focus and avoiding unnecessary withdrawals.

» Risk and Time Horizon
– You have eight years before funds are needed.
– Eight years is medium term, not too short or too long.
– Some equity is needed for growth, but safety also matters.
– Balance between growth and protection is key.

» Why Mutual Funds Work for This Goal
– Mutual funds provide diversification and professional management.
– Active funds outperform index funds in medium term goals.
– Index funds lack flexibility and are rule-bound, not manager-driven.
– Active funds help in risk control and better allocation decisions.
– SIP in mutual funds brings discipline and lowers market timing risk.

» Suggested Allocation for Lumpsum Rs. 6.5 Lakh
– Do not put all in equity at once.
– Stagger lumpsum into equity over six to nine months.
– This reduces entry risk during market highs.
– Part of lumpsum can be parked temporarily in short term fund.
– Allocate 55% in equity oriented funds for growth.
– Allocate 30% in hybrid funds for stability.
– Allocate 15% in debt funds for safety.

» Suggested Allocation for SIP Rs. 15,000 Monthly
– Continue SIPs consistently for next eight years.
– Allocate 60% to equity oriented funds.
– Allocate 25% to hybrid funds.
– Allocate 15% to debt funds.
– This mix balances growth and reduces volatility.

» Role of Equity in Child Education Planning
– Equity provides long term growth above inflation.
– Without equity, your savings may lose value.
– But equity portion should not be 100% for medium term.
– Staggering equity exposure reduces risk of market corrections.

» Role of Hybrid Funds in This Plan
– Hybrid funds combine equity and debt in one portfolio.
– They reduce volatility compared to pure equity.
– They are suitable for medium term goals like education.
– They provide smoother growth than pure equity funds.

» Role of Debt in This Plan
– Debt funds protect capital from heavy losses.
– They provide liquidity and stability.
– They act as cushion during equity downturns.
– They ensure your child’s education fund is not completely exposed to risk.

» Importance of Regular Review
– Review portfolio once a year.
– Check allocation between equity, hybrid and debt.
– Rebalance if allocation has shifted too much.
– Avoid checking NAV daily, it creates stress.
– Keep focus on final goal, not short term noise.

» Taxation Aspect to Keep in Mind
– Equity mutual funds have special tax rules.
– Long term gains above Rs. 1.25 lakh are taxed at 12.5%.
– Short term gains are taxed at 20%.
– Debt mutual funds gains are taxed as per your slab.
– Holding for longer reduces tax impact.
– Systematic withdrawal nearer to goal reduces tax shock.

» Avoiding Direct Mutual Funds and Index Funds
– Direct funds look cheaper but carry hidden risks.
– Without a Certified Financial Planner, mistakes in selection hurt performance.
– Regular funds through CFP or MFD ensure proper guidance and tracking.
– Index funds are passive and lack risk management flexibility.
– Actively managed funds are better for your goal timeline.

» Preparing for Withdrawal in Final Years
– Do not stay fully in equity till last year.
– Start shifting equity into debt two years before goal.
– This protects against market fall near education expenses.
– Step-down approach ensures child’s education is not affected.

» Discipline and Emotional Control
– Do not stop SIP during market downturn.
– Continue investing even when returns look low.
– Market cycles will recover with time.
– Emotional discipline ensures real wealth creation.

» Protecting Child’s Education with Insurance
– Secure child’s education with proper term insurance.
– If anything happens to you, child’s future stays safe.
– Insurance is protection, not investment.
– Do not mix insurance with investments.

» Emergency Fund and Stability
– Keep at least six months expenses as emergency fund.
– Do not use child’s education corpus for emergencies.
– Emergency fund avoids forced sale of investments.

» Finally
Your decision today ensures your child will not struggle tomorrow. Lumpsum plus SIP is a powerful combination. Balanced mix of equity, hybrid and debt reduces risk. Discipline, review, and timely withdrawal planning will make this journey smooth. Avoid direct funds and index funds, and take Certified Financial Planner guidance. With this path, your child’s education dream will be safe and strong.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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