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Should I invest in a plot, mutual funds or gold for my daughter?

Ramalingam Kalirajan |7269 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 16, 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 - Dec 15, 2024Hindi

Hello sir, im 40yr old with 2 kids ( boy 6yr old and girl 12yrs old) earning around 60k to 70k per month and husband no working so I'm the bread earner of the house. i have a MF investment around 63lakhs in all categories. I have a own house thankfully????. Now my parents are giving me another 10lakhs next month. So i was thinking whether to invest in 30*40 plot, another Mutual fund investment or invest in gold for daughter future requirements . When i calculated the MF returns and plot returns after 15yrs, im getting almost same returns. I took avg 12% ROI on 10 lakhs . Im very confused as husband is not cooperative in taking any decision. Plz suggest me where should I invest this 10lakhs ?

Ans: You have managed your finances very well, especially as the sole breadwinner. Owning a house and building a mutual fund corpus of Rs. 63 lakhs reflects disciplined planning. Let us analyse where the additional Rs. 10 lakhs can be invested for optimal returns.

Factors to Consider Before Investing
Children’s Education and Marriage Goals:
Your kids’ higher education and marriage are critical financial goals. Ensure these are well-funded.

Liquidity Needs:
Opt for investments that align with your future liquidity needs. Avoid locking funds unnecessarily.

Risk Tolerance and Returns:
Compare the risk and returns of all options. Choose investments matching your goals.

Husband’s Non-Involvement:
Since your husband is not contributing financially, decisions should ensure long-term family security.

Investment in Real Estate (30*40 Plot)
Real estate provides tangible value but comes with challenges like maintenance, taxes, and selling difficulties.

Plots require holding for the long term to appreciate significantly.

Returns from real estate often align with inflation. They may not outperform other options.

Liquidity is limited. Selling a plot during emergencies can be time-consuming.

Investment in Mutual Funds
Mutual funds offer flexibility, diversification, and professional fund management.

You already have Rs. 63 lakhs in mutual funds. This shows familiarity with this investment.

Equity mutual funds can provide higher long-term returns, typically 12-15%.

They are tax-efficient. Long-term gains up to Rs. 1.25 lakh per year are tax-free. Beyond this, they are taxed at 12.5%.

Regular funds through an MFD associated with a Certified Financial Planner (CFP) offer expert advice and monitoring.

Avoid direct funds. They require active tracking and higher financial knowledge.

Investment in Gold
Gold is ideal for meeting cultural and marriage-related needs.

Gold prices have historically delivered moderate returns (6-8%).

Physical gold has making charges and risks like theft.

Consider gold ETFs or Sovereign Gold Bonds instead. These eliminate storage risks and offer modest interest.

Gold investments should not exceed 10-15% of your portfolio.

Recommended Investment Strategy
1. Focus on Mutual Funds for Long-Term Goals
Allocate Rs. 10 lakhs to equity mutual funds for higher returns over 10-15 years.

Consider diversifying into large-cap, mid-cap, and flexi-cap funds for balanced risk and growth.

Since you already have significant investments, ensure there is no overlap in fund categories.

Use the Systematic Transfer Plan (STP) to stagger investments. This reduces market timing risks.

2. Create a Children’s Education Corpus
Your daughter will need higher education funds in 5-6 years.

Start a dedicated mutual fund for this goal. Use balanced or hybrid funds for moderate risk.

For your son’s education (12-13 years away), equity funds are suitable.

Periodically review and adjust these funds as per market performance.

3. Allocate to Gold for Specific Needs
Invest 10-15% of the amount (Rs. 1-1.5 lakh) in gold for your daughter’s marriage.

Opt for Sovereign Gold Bonds or digital gold for safety and added interest.

Avoid over-investing in gold, as it has limited long-term growth potential.

4. Build an Emergency Fund
Check if you have an emergency fund equal to 6-12 months of expenses.

If not, allocate a portion of Rs. 10 lakhs to secure your family’s financial stability.

Consider liquid mutual funds or short-term fixed deposits for this purpose.

5. Secure Your Retirement
Ensure your retirement goals are covered.

Top up your mutual fund investments if you need additional corpus for retirement.

Regularly increase your monthly SIPs whenever your income grows.

Benefits of Opting for Mutual Funds
Mutual funds are easier to liquidate than real estate.

They offer flexibility to rebalance or withdraw funds as per changing goals.

Diversification across equity, debt, and hybrid categories reduces risks.

You can track performance and get professional advice from a CFP.

Final Insights
The additional Rs. 10 lakhs is a valuable opportunity to strengthen your financial position.

Prioritise mutual funds for long-term growth and children’s future needs.

Invest a smaller portion in gold to meet cultural obligations.

Real estate may not be the best option due to liquidity and maintenance issues.

Keep reviewing your portfolio annually and adjust it based on market performance.

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.