Investment for child education combined with retirement at 36

Ans: At 36, you have significant goals: Rs 5 crore in 15 years, combined with education and retirement planning. Your current portfolio includes Rs 10 lakh in mutual funds (Mirae, Parag, Nippon) and Rs 10 lakh in PPF. With a monthly SIP of Rs 1 lakh, it’s crucial to structure your investments to meet your financial targets.

Your investment focus should balance both growth and security, while aligning with your long-term objectives.

Analysing Your Current Portfolio
Mutual Funds: You have already invested Rs 10 lakh in Mirae, Parag, and Nippon. These funds are known for good performance, but it’s important to evaluate whether they align with your 15-year horizon.

PPF: Your Rs 10 lakh in PPF offers security but lacks the growth potential needed for your ambitious target of Rs 5 crore.

Assessing Your SIP Options
Parag Parikh: This fund has gained popularity due to its focused investment approach. If you already invest Rs 1 lakh annually in this fund, continuing with it can be beneficial, but ensure it complements your overall portfolio.

HDFC Guaranteed Sanchay Fixed Maturity: This option offers fixed returns and guarantees, which might appeal to conservative investors. However, it lacks the growth potential required for long-term goals like yours.

Nippon Bluechip Guaranteed: Similar to the HDFC option, this also guarantees returns but is limited in its ability to generate significant growth over 15 years.

Disadvantages of Guaranteed Plans
Low Growth Potential: Guaranteed plans often provide security but offer lower returns, which may not meet your goal of Rs 5 crore in 15 years.

Lock-in Period: These plans may have long lock-in periods, reducing your flexibility.

Inflation Impact: Fixed returns may not keep pace with inflation, eroding the purchasing power of your savings.

Benefits of Actively Managed Mutual Funds
Higher Growth Potential: Actively managed funds can generate higher returns, crucial for long-term goals like retirement and child education.

Flexibility: Mutual funds offer liquidity and the ability to adjust your investments as needed.

Diversification: These funds invest in a variety of sectors and assets, spreading risk and increasing potential returns.

Recommendations for Your Investment Strategy
Focus on Growth-Oriented Mutual Funds

Equity Funds: Allocate a significant portion of your SIP to equity mutual funds. Over 15 years, equity funds have the potential to deliver the high returns needed to meet your Rs 5 crore target.

Flexi-Cap Funds: Consider increasing exposure to flexi-cap funds like Parag Parikh. These funds can adapt to market conditions, investing in companies of all sizes for better returns.

Small-Cap and Mid-Cap Funds: Adding some exposure to small-cap and mid-cap funds can boost returns, though they come with higher risk. Over a long horizon like 15 years, this risk can be mitigated.

Avoid Over-Reliance on Guaranteed Plans

Shift Focus: Shift focus from guaranteed plans to actively managed funds. Your goal of Rs 5 crore requires aggressive growth, which guaranteed plans cannot provide.

Review Existing Investments: Regularly review your investments. If you have guaranteed plans, assess their contribution to your overall goal. Consider reallocating those funds to higher-growth options.

Managing Risk and Return
Diversify: Diversify across different mutual funds to spread risk and capture growth from various sectors.

Monitor Regularly: Keep a close eye on your portfolio’s performance. Rebalance annually to ensure it remains aligned with your goals.

Consider SIP Step-Up: If your financial situation allows, consider a SIP step-up strategy, where you gradually increase your SIP amount each year. This can significantly enhance your corpus over time.

Planning for Your Child’s Education
Separate the Education Fund

Dedicated Education Fund: Create a separate investment plan for your child’s education. While Rs 5 crore may cover both education and retirement, having a dedicated fund ensures that your child’s future is secure.

Equity-Focused Approach: Use equity mutual funds for the education fund as well. Over the next 15 years, equity can grow the fund substantially.

Regular Review: As your child grows older, review the education fund to ensure it’s on track. Adjust contributions if necessary.

Final Insights
Your goal of Rs 5 crore in 15 years is achievable, but it requires a strategic approach. Avoid over-reliance on guaranteed plans, as they lack the growth potential needed for such ambitious targets. Focus on equity and flexi-cap mutual funds, which offer the growth required to meet your goals.

Create a separate education fund to ensure that your child’s future is secure, and consider increasing your SIP amount gradually. Regularly review and rebalance your portfolio to stay aligned with your goals.

By maintaining a disciplined investment approach and focusing on growth, you can achieve both your retirement and your child’s education goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in