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

Should I Invest in SBI Mutual Funds for My Daughter's Education?

Ramalingam

Ramalingam Kalirajan  |8005 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 19, 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
Prajwal Question by Prajwal on Jan 19, 2025Hindi
Listen
Money

Hello Sir. I have Rs1,00,000 that I want to invest as a lump sum in SBI Mutual Funds for the long term (15+ years). Considering that SBI has one of the largest Asset Management Companies (AMCs), could you please recommend which SBI Mutual Funds would be suitable for such an investment and have the potential to deliver good returns over this period? I am doing this investment for my daughter's education.

Ans: Your decision to invest Rs 1,00,000 for your daughter's education is commendable. A long-term horizon of 15+ years offers significant growth potential through mutual funds. Below are insights and recommendations to guide your investment.

Why SBI Mutual Funds?

SBI is one of India’s largest and most trusted AMCs.

They offer a wide range of funds suitable for different goals and risk levels.

Their consistent performance track record reflects sound fund management.

Key Factors to Consider for Long-Term Investments

Investment Objective:

Education is a critical financial goal.

Focus on wealth accumulation through equity-oriented funds.

Risk Appetite:

Equity funds involve volatility but offer high growth.

Ensure alignment with your risk tolerance.

Fund Type Selection:

Choose funds based on asset allocation and diversification.

Evaluate the performance of large-cap, mid-cap, and hybrid funds.

Tax Implications:

LTCG over Rs 1.25 lakh is taxed at 12.5%.

Understand taxation for equity and debt funds.

Suggested Fund Categories for Your Investment

1. Large-Cap Funds

Invest in funds focusing on well-established companies.

They offer stability and moderate risk.

Suitable for conservative investors.

2. Mid-Cap Funds

These funds focus on medium-sized companies with high growth potential.

They are riskier than large-cap funds but offer higher returns.

Suitable for investors willing to take calculated risks.

3. Flexi-Cap Funds

Invest across large, mid, and small-cap companies.

They offer diversification and the flexibility to adapt to market conditions.

Ideal for investors seeking balanced growth.

4. Equity-Linked Savings Schemes (ELSS)

ELSS funds offer tax benefits under Section 80C.

They have a lock-in period of three years.

Suitable for investors aiming for tax-efficient long-term growth.

5. Hybrid Funds

Invest in a mix of equity and debt instruments.

They offer stability through debt and growth through equity.

Suitable for moderate-risk investors.

Benefits of Investing Through a Certified Financial Planner (CFP)

CFPs offer expert guidance tailored to your goals.

They help monitor fund performance regularly.

They ensure optimal fund selection and rebalancing.

Regular plans through CFPs provide dedicated service and support.

Why Choose Actively Managed Funds?

Active funds aim to outperform benchmarks through expert fund management.

They offer higher potential returns compared to index funds.

Fund managers actively adjust portfolios based on market trends.

Ideal for long-term investors seeking growth.

Key Steps to Start Your Investment

Define your financial goal clearly.

Consult with a CFP for fund selection.

Review the chosen fund’s historical performance and portfolio composition.

Use SIPs for additional investments to benefit from rupee cost averaging.

Monitor your portfolio periodically to ensure alignment with your goals.

Final Insights

Investing in SBI Mutual Funds is a smart choice for your daughter’s education. Selecting the right fund category ensures growth and stability over 15+ years. Partnering with a Certified Financial Planner ensures professional guidance and optimal returns. Stay committed to your goal, review your investments regularly, and focus on long-term growth.

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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |8005 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 2024

Money
I am 40 years old in my monthly earning i have decided to invest Rs 10 000/- to four of the best mutualfund in SBI only in SIP please suggest me the best mutual fund for a duration of more than 7to10years thankyou.
Ans: At 40 years old, you've made a wise choice by deciding to invest Rs 10,000 monthly in mutual funds. Choosing to invest in four mutual funds through SIPs is a solid approach. A long-term horizon of 7 to 10 years aligns well with your goals, allowing your investments to grow and benefit from compounding.

However, instead of focusing on selecting specific funds, let’s discuss the types of funds that would suit your needs and how to structure your portfolio for optimal growth.

Importance of Diversification
When investing in mutual funds, diversification is key. By spreading your investment across different types of funds, you reduce risk and increase the potential for returns.

Equity Funds: These funds invest in stocks and offer high growth potential. Given your long-term horizon, equity funds should form a significant part of your portfolio. They are best suited for wealth creation over a period of 7 to 10 years.

Debt Funds: These funds invest in fixed-income securities like bonds. While they offer lower returns compared to equity funds, they provide stability. Including some debt funds can help balance the risk in your portfolio.

Hybrid Funds: Hybrid funds invest in both equity and debt instruments. They offer a balanced approach, giving you exposure to the growth potential of equities while cushioning the portfolio with the stability of debt.

Sectoral and Thematic Funds: These funds focus on specific sectors or themes like banking, technology, or infrastructure. While they can offer high returns, they also come with higher risk. It’s advisable to allocate a smaller portion of your investment to these funds if you have a higher risk appetite.

SIPs: The Power of Consistency
Investing through SIPs is a smart choice for several reasons:

Rupee Cost Averaging: SIPs help you buy more units when prices are low and fewer when prices are high. This reduces the average cost per unit over time.

Discipline: SIPs instill a habit of regular investing, which is crucial for long-term wealth creation.

Flexibility: SIPs offer the flexibility to start, stop, or modify your investment amount based on your financial situation.

Compounding: Over time, the returns generated on your SIP investments will start generating returns themselves, leading to exponential growth.

Actively Managed Funds vs. Index Funds
You might have heard about index funds, but it's essential to understand the differences.

Actively Managed Funds: These funds are managed by professional fund managers who actively select stocks and adjust the portfolio based on market conditions. They have the potential to outperform the market, offering higher returns.

Index Funds: These funds track a specific index like the Nifty 50. While they have lower management fees, they simply mirror the market and lack the potential to outperform it. Over time, actively managed funds might provide better returns, especially in a well-managed SIP.

Given the advantages, you might prefer actively managed funds for your SIPs, especially with a long-term horizon.

Disadvantages of Direct Funds
Direct funds might seem appealing due to lower expense ratios, but they come with certain drawbacks:

No Professional Guidance: Direct funds do not offer advisory services. You’ll need to choose and manage your investments without professional help, which can be challenging.

Time-Consuming: Monitoring and rebalancing your portfolio can be time-consuming and require a good understanding of the market.

Benefits of Regular Funds: By investing in regular funds through a Certified Financial Planner, you get access to expert advice. A CFP can help you select the right funds, monitor your investments, and make necessary adjustments.

Structuring Your Portfolio
Given your decision to invest in four mutual funds, here's a suggested structure:

Large Cap Equity Fund: Allocate a significant portion to a large cap fund. These funds invest in well-established companies with a history of stable returns. They offer lower risk compared to mid or small cap funds and are a good foundation for your portfolio.

Mid Cap Equity Fund: Mid cap funds invest in companies that are smaller than large caps but have strong growth potential. They are slightly riskier but can offer higher returns over time.

Hybrid Fund: Consider including a hybrid fund to balance the equity exposure with some debt. This reduces overall portfolio risk and adds stability, especially in volatile markets.

Debt Fund: A small allocation to a debt fund will provide stability and help in managing the overall risk of your portfolio.

This balanced approach allows you to tap into the growth potential of equity while maintaining some stability with debt investments.

Importance of Regular Reviews
Once you’ve set up your SIPs, it’s important to review your portfolio regularly. Markets and your personal financial situation can change, so periodic reviews will ensure that your investments stay aligned with your goals.

Annual Review: Conduct an annual review of your portfolio with a Certified Financial Planner. This will help you assess performance and make necessary adjustments.

Rebalancing: Over time, certain funds may outperform or underperform. Rebalancing ensures that your portfolio remains aligned with your risk tolerance and investment goals.

Final Insights
Investing Rs 10,000 monthly in four mutual funds through SIPs is a well-thought-out decision. Diversifying across different types of funds, focusing on actively managed funds, and seeking professional guidance will help you achieve your financial goals over the next 7 to 10 years.

Stay disciplined with your SIPs, review your portfolio regularly, and ensure your investments are aligned with your long-term goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Latest Questions
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