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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 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 - Jun 10, 2025Hindi

Hello Sir, I have a 10 year old daughter. What are schemes and plans in which I could invest for my daughter's future education.

Ans: Time Horizon Left Before Her Higher Studies
Your daughter is 10 years old now.

You have around 7 to 8 years left.

After that, expenses will shoot up fast.

Engineering, Medical, or Abroad – all need large funds.

So you have limited time to grow money.

Delaying planning further can harm your goal.

Start structured investments from this month itself.

Why Fixed Plans Will Not Work Alone
Many parents invest in only fixed plans.

These include Sukanya, PPF, RD, and LIC.

These are very safe but give low growth.

Returns are often below education inflation.

Education cost doubles every 7 to 8 years.

A fixed deposit gives 6-7% returns.

College fees are rising by 10-12% yearly.

So mismatch will happen if only fixed returns.

Use fixed products for stability, not for growth.

A Good Plan Must Have Three Investment Buckets
Let’s divide your plan into 3 parts:

1. Safety Bucket (Stability and Discipline)
Use government schemes for basic security.

PPF is a good long-term fixed interest option.

Start yearly contributions till she turns 21.

Avoid direct FD as it has lower post-tax returns.

Use recurring deposit only for short term goals.

These give discipline but won’t grow wealth much.

This bucket is for emergencies or short-term goals.

2. Growth Bucket (Actual Wealth Creation)
This is the most important investment area.

Use mutual funds with SIP to build large corpus.

Choose active funds only, not index funds.

Index funds blindly copy market and carry risk.

They don’t protect downside during bad years.

Active funds managed by experts offer better safety.

Regular plan via MFD and CFP gives advisory support.

Don’t invest in direct plans without expert guidance.

Direct plans seem cheap but lack review support.

Many investors lose track without MFD follow-up.

Through regular plan, CFP reviews fund performance yearly.

So you keep on right track without risk.

Do monthly SIP in diversified equity funds.

Increase SIP amount every year with salary hike.

Also invest lump sum in balanced or multi-cap funds.

This will reduce market timing risk.

Keep gold fund allocation low, not more than 5%.

3. Insurance Bucket (Protection of Goal)
Take pure term insurance immediately if not done.

Amount should be minimum 15-20 times your income.

Never mix investment with insurance.

Avoid child ULIP or endowment plans.

They give poor returns and high charges.

They lock money but give low growth.

Cancel them if already taken and shift to mutual funds.

Always keep family secure in your absence.

Buy critical illness and accident rider separately.

Also take health insurance for entire family.

Don’t depend only on employer coverage.

Education goal must survive even if income stops.

Suggested Action Plan from This Month
Start SIP in actively managed diversified equity fund.

Begin with Rs. 5000 per month minimum.

Increase every year with salary increment.

Avoid index funds and ETFs completely.

They underperform in volatile or sideways markets.

Also avoid direct mutual fund plans.

Use regular plans via CFP and MFD.

They give proper rebalancing and goal tracking.

Add Rs. 1.5 lakh every year in PPF.

Maintain this till daughter turns 21 years.

Review PPF maturity matching her marriage or postgrad need.

Keep at least Rs. 2 lakhs in emergency fund.

Keep this in liquid or overnight fund.

Top up term cover every 5 years.

Don’t depend on gold ETF or e-gold too much.

These don’t beat inflation regularly.

Use them as minor hedge, max 5%.

If You Already Have Sukanya Samriddhi Account
Continue Sukanya Samriddhi till maturity.

It gives fixed return with EEE benefit.

But remember, withdrawal is allowed only for education.

You can’t use it flexibly like mutual funds.

So don’t depend fully on Sukanya Samriddhi.

Use mutual fund SIP as primary wealth engine.

Sukanya is only a secondary support plan.

Tax Efficiency and Liquidity Are Key
All your plans must offer tax benefits.

PPF, NPS, ELSS give tax benefits under Section 80C.

Use debt funds for short term goals with tax planning.

Don’t keep more than 1 year’s fee in FD.

Equity SIP held for long-term is tax efficient.

Only profits above Rs. 1.25 lakh are taxed.

LTCG tax on equity is only 12.5% now.

Debt mutual funds taxed as per income slab.

Plan mix accordingly for better post-tax returns.

Avoid These Common Mistakes
Don’t buy child ULIP from insurance company.

These eat up charges and give poor returns.

Don’t mix emotions with investment plans.

Don’t invest in direct equity stocks yourself.

It needs expertise and continuous monitoring.

Don’t rely only on PPF or Sukanya for goal.

Don’t chase returns, focus on consistent planning.

Don’t delay SIP waiting for better market level.

Don’t stop SIP during market correction.

That’s when wealth is actually created.

Monitor and Review Every 12 Months
Once your plan is running, don’t ignore it.

Review SIP performance and goals once every year.

Shift from equity to hybrid when goal is 2-3 years away.

This will protect from last-minute market fall.

Rebalance fund allocation with help of CFP.

Also review term cover and medical cover yearly.

Make sure nominee details are updated.

Keep spouse informed about all investments.

Maintain written record of plan in one file.

Don’t rely only on memory or emails.

What Happens If You Start Late?
If you delay, you need to invest double.

You’ll lose power of compounding.

A Rs. 5000 SIP started now grows large.

Same SIP started 3 years later grows small.

The longer you wait, the harder it gets.

Starting early reduces burden on your salary.

You need to save less if you start early.

But you’ll need to save more if late.

So time is more important than money.

Start with small, but stay consistent for years.

Final Insights
You have 8-10 years left for daughter’s education.

Use active equity funds for real growth.

Don’t depend only on PPF or Sukanya.

Avoid ULIPs and direct plans without support.

Build protection with term and health cover.

Make a proper goal-based investment strategy.

Keep your investments flexible and tax-efficient.

Track yearly and correct as per situation.

With right actions, you will reach your goal confidently.

Don’t postpone action. Start building her future today.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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.