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3-Year-Old Son's Education: Seeking Investment Advice for Higher Education

Ramalingam

Ramalingam Kalirajan  |7831 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 03, 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
chethan Question by chethan on Nov 29, 2024Hindi
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Dear Sir/Madam, I hope you are doing well. I have a 3-year-old son, and currently, I haven’t started any specific investments for his future. I’m planning to invest ?15,000 per month for the next 13-15 years to build a corpus for his higher education. Given the long-term nature of this goal, I am considering options like small-cap mutual funds or thematic smallcase investments. Could you please guide me on the best investment options that align with this goal and have the potential to generate high returns over the next 13-15 years? I would appreciate your expert advice to ensure the investments are well-suited for securing his education needs in the future.

Ans: It is indeed a thoughtful and commendable initiative to plan early for such an important milestone. A disciplined investment approach with a well-diversified strategy can help you achieve this long-term objective.

Below, I will provide a detailed analysis and a structured approach to align your investment with your son's future education needs.

Define Your Financial Goal Clearly
Understand the future cost of higher education. Consider inflation in education expenses.
For instance, current education costs double every 8-10 years due to inflation. Plan accordingly.
Ensure your goal aligns with the time horizon of 13-15 years.
The Importance of Regular Savings
Investing Rs 15,000 monthly is an excellent start.
Regular savings, when combined with compounding returns, build a significant corpus over time.
Stick to this commitment to benefit from the power of consistency.
Investment Strategy for Long-Term Growth
Diversify Across Mutual Funds
Equity Mutual Funds: Suitable for long-term goals due to higher return potential.

Small-cap funds can provide high growth but come with higher risk.
Mid-cap and diversified equity funds balance growth and risk.
Actively Managed Funds: These are managed by experts who aim to outperform the market.

They are preferable over index funds for generating alpha returns.
Regular fund reviews ensure better performance alignment with goals.
Thematic and Smallcase Investments
Thematic investments can offer growth, but they are concentrated and risky.
These options require deep market knowledge and regular tracking.
Instead, prefer well-diversified equity funds managed by experienced professionals.
Avoid Direct Mutual Funds
Direct funds may appear cost-effective but lack professional guidance.
Investing through a Certified Financial Planner ensures better portfolio management.
Regular funds allow access to advice, reviews, and tailored solutions.
Taxation Awareness
Long-term capital gains (LTCG) on equity funds above Rs 1.25 lakh attract 12.5% tax.
Short-term capital gains (STCG) are taxed at 20%.
Debt funds are taxed as per your income tax slab.
Plan redemptions to minimise tax impact over the long term.
Build a Balanced Portfolio
Allocate across asset classes based on your risk tolerance and goal timeline.
Focus on equities for long-term growth but add debt for stability near the goal's end.
Review and rebalance your portfolio periodically with your Certified Financial Planner.
Plan for Contingencies
Establish a robust emergency fund covering 6-12 months of expenses.

This ensures your investments remain untouched during unforeseen situations.

Opt for adequate term insurance to safeguard your family’s financial future.

Ensure health insurance for the family to avoid dipping into investments.

Advantages of Professional Guidance
Certified Financial Planners offer tailored strategies for achieving financial goals.
Regular fund reviews help align investments with market trends and goals.
They provide emotional discipline, helping you avoid impulsive decisions.
Additional Points to Consider
Avoid ULIPs or endowment plans as they mix insurance and investment inefficiently.
Focus solely on term insurance for risk coverage and mutual funds for investments.
Final Insights
Your goal is achievable with disciplined investing and prudent planning.
Focus on a diversified portfolio with a mix of actively managed equity funds.
Avoid thematic or high-risk direct investments without expertise and guidance.
Monitor your investments regularly to ensure they remain aligned with your goals.

By following these steps and working with a Certified Financial Planner, you can secure your son’s educational future with confidence.

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.
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Ramalingam

Ramalingam Kalirajan  |7831 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

Asked by Anonymous - Apr 17, 2024Hindi
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Hello, I want to invest for my girl child for her higher education, she is currently 1yr old. Please suggest some good investment plans or schemes other than SSY.
Ans: Investment Plans for Your Child’s Higher Education
Investing early for your child's higher education is a wise decision. Starting now allows you to take advantage of compound interest, ensuring a substantial corpus when she reaches college age. Let’s explore various investment options that can help you achieve this goal.

Equity Mutual Funds
Equity Mutual Funds are an excellent option for long-term goals like your child's education. They offer higher returns compared to traditional savings schemes. Given the long investment horizon (17-18 years), you can benefit from the power of compounding and ride out market volatility.

Large Cap Funds: Invest in well-established companies with a track record of steady returns. They are less volatile than mid and small cap funds.

Mid Cap and Small Cap Funds: While riskier, these funds offer the potential for higher returns. Allocate a smaller portion of your portfolio to these funds for diversification and growth.

Systematic Investment Plans (SIPs)
Systematic Investment Plans (SIPs) allow you to invest a fixed amount regularly in mutual funds. This method is ideal for long-term investing as it averages out the cost of investments over time and reduces market timing risk.

Advantages: Disciplined investing, rupee cost averaging, and compounding benefits.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a safe and tax-efficient investment option with a long-term horizon. It offers attractive interest rates and the interest earned is tax-free.

Tenure: 15 years, which can be extended in blocks of 5 years.

Benefits: Safe investment, tax-free returns, and compounding benefits.

Child Plans from Insurance Companies
Child Plans offered by insurance companies are specifically designed to meet future educational expenses. These plans provide insurance cover and an investment component.

Types: Unit Linked Insurance Plans (ULIPs) and traditional endowment plans.

Features: Regular payouts during key educational milestones, life cover for the parent, and waiver of future premiums in case of the policyholder's untimely demise.

Sukanya Samriddhi Yojana (SSY)
While you mentioned excluding SSY, it's worth noting that SSY is a government-backed scheme offering attractive interest rates and tax benefits, specifically designed for the girl child’s future education and marriage expenses.

National Savings Certificate (NSC)
National Savings Certificate (NSC) is a fixed-income investment scheme that offers guaranteed returns and tax benefits.

Tenure: 5 years.

Benefits: Safe investment, guaranteed returns, and tax benefits under Section 80C.

Gold ETFs or Sovereign Gold Bonds
Gold ETFs and Sovereign Gold Bonds are effective ways to invest in gold without holding physical gold. They offer a hedge against inflation and portfolio diversification.

Gold ETFs: Trade on the stock exchange, offering liquidity and convenience.

Sovereign Gold Bonds: Issued by the government, providing interest payments and the benefit of capital appreciation.

Diversified Portfolio
Creating a diversified portfolio can mitigate risks and enhance returns. Here’s a suggested allocation:

Equity Mutual Funds: 50-60% for growth and compounding benefits.

PPF and NSC: 20-30% for stability and tax benefits.

Child Plans: 10-20% for targeted educational milestones and insurance cover.

Gold ETFs or Bonds: 5-10% for inflation protection and diversification.

Regular Monitoring and Rebalancing
Regularly monitor and rebalance your portfolio. Ensure that your investments align with your goals and risk tolerance. As your child approaches college age, gradually shift from equity to more stable, fixed-income investments to protect the corpus from market volatility.

Consulting a Certified Financial Planner
Engaging with a Certified Financial Planner can provide personalized advice tailored to your financial situation. They can help you create a comprehensive investment plan that aligns with your goals and risk tolerance.

Conclusion
By starting early and choosing a mix of investment options, you can build a substantial corpus for your child's higher education. Diversify your investments, monitor them regularly, and seek professional advice to stay on track. Your thoughtful planning will ensure a bright future for your daughter.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7831 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 10, 2024

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Hi, I have to create a corpus of 2 cr for my kids education in 5 years. What is your advise on investments, including MF, Equities, and other schemes pls ?
Ans: It's great that you're planning ahead for your kids' education. Achieving a corpus of 2 crores in 5 years requires a disciplined investment approach with a focus on growth potential and risk management. Here's some advice on suitable investment avenues:

Equities: Investing in equities can offer higher returns over the long term. Consider allocating a portion of your investment towards well-researched stocks or equity mutual funds. While equities come with volatility, they have the potential to outperform other asset classes.
Mutual Funds: Mutual funds provide diversification and professional management, making them a popular choice for goal-based investing. Opt for a mix of equity and debt mutual funds based on your risk tolerance and investment horizon. Equity funds can offer growth potential, while debt funds provide stability.
Systematic Investment Plan (SIP): SIPs allow you to invest regularly in mutual funds, helping you benefit from rupee-cost averaging and reduce the impact of market volatility. Start SIPs in suitable mutual funds to gradually build your corpus over the next 5 years.
Debt Instruments: Considering the short investment horizon, include debt instruments like fixed deposits, debt mutual funds, or short-term debt funds in your portfolio. These instruments offer stability and capital preservation, which is essential when your goal is nearing.
Regular Review and Rebalancing: Periodically review your investments to ensure they are aligned with your goal of creating a 2 crore corpus for your kids' education. Rebalance your portfolio as needed to maintain the desired asset allocation and risk level.
It's crucial to consult with a Certified Financial Planner to create a personalized investment plan tailored to your financial goals, risk tolerance, and investment horizon. They can help you make informed decisions and navigate the complexities of the market.

By adopting a diversified and disciplined investment strategy, you can work towards achieving your goal of funding your kids' education with a 2 crore corpus in 5 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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Hi Anu I am a married woman with a very supportive husband and daughter. For last 10 years I am having an affair with a colleague and things are pretty well between us. Both of us have found the comfort and requisite from each other which we missed in married life and it saved our respective marriage though none of our family are aware of it. We balanced this till now effectively. Recently I got an opportunity within the company which is very lucrative and will enhance my career goals altogether however, for this I have to shift to another state. Now , my bf is very upset on this as it means he will not be able to meet me as we do every day. My husband and Daughter is fine with my shifting however my parents who are old are also apprehensive since I am the only child and do take care of them. My husband has assured to support them in absence of me and I have full confidence on him. All throughout my life I have focused on my professional career and have worked towards that and now when I got this opportunity I am emotionally unstable and unable to take the decision. My dilemma is surrounding various aspects. 1- Don’t want to leave my BF as he is my strength. 2- My parents are old and since I being the only child,they ae 3- If I could not perform in the new role then? 4- The daily hardship that I have to take over in a new place as my husband will not shift. 5- Remuneration wise not as such however if you say power then yes. Learning – knowledge enhancement and career upliftment - yes very much. 6- Current role will not grow much however stability as of now do exists. Can you help me to take the decision ?
Ans: Dear Nibedita,
What is important to you and what helps you grow professionally and personally must be looked at? Constraints are always going to play a role BUT working around it may help you make a decision. If professionally you are going to grow into the role and for this you need to work around things for the time being, then you must do just that. But in all this, do factor that you have a daughter who is still young and will need your presence a lot; physically and emotionally.
Now, how you work this with your BF is something that is between the two of you; but it's not power or money BUT how you grow in your new role.
Also, talk to your family and come to an arrangement whereby they also become your pillar of strength and support. You will then be able to come to a viable decision.

All the best!
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Mind Coach|NLP Trainer|Author
Drop in: www.unfear.io
Reach me: Facebook: anukrish07/ AND LinkedIn: anukrishna-joyofserving/

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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.

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