Hi, I am investing 3.5 lacs every month in small and mid cap SIP for the last 2 years. My son will be going to study abroad. Should I fund his education from the MF or should I take a student loan and not touch the MF?

Ans:

I have attached my protfolio of MFs. Though I have been investing in MFs since 2005, I have been redeeming the same many times like in 2010 for house and in 2014 & 2017 for personal trips abroad with my family.

The present state of my MFs is given above. My horizon is for long and hence my questions are as follows:

Ans: Hello Satya . With multiple goal align in next 15 yrs. I would suggest to consider Large cap, small cap , midcap , and flexicap categories for your portfolio.

Ans: Spread the investments equally in the below,

ICICI Large & Midcap
Kotak Emerging Equity
Nippon Small Cap

Ans: Your decision to invest Rs 10 lakh in a PNB MetLife Super Saver plan reflects your concern for securing your child's education. However, let us assess its worthiness:

Investment vs. Insurance: Insurance policies combining investment often provide lower returns than mutual funds.
Returns Analysis: These plans generally deliver 4%-6% returns, which may not outpace inflation.
Premium Commitments: You have paid Rs 8 lakh, and one more premium of Rs 2 lakh is due.
What Should You Do With the Policy?
Continue Until Maturity: Since you have already paid 80% of premiums, it may be wise to complete the last payment. Exiting now might result in surrender charges and a financial loss.

Reinvestment After Maturity: When the policy matures in 2031, reinvest the proceeds in equity mutual funds for better returns.

Starting Monthly SIPs for Retirement and Education
1. Assess Your Goals
Your primary goal is funding higher education abroad for two children.
The second goal is building a retirement corpus to secure your future.
2. Suggested SIP Approach
Equity Mutual Funds for Growth:

Allocate 70%-80% to equity-oriented funds for long-term wealth creation.
Opt for actively managed funds instead of index funds for better growth potential.
Debt Funds for Stability:

Allocate 20%-30% to debt mutual funds for low-risk and stable returns.
Debt funds also ensure liquidity and risk mitigation.
Advantages of Regular Funds Through Certified Financial Planners
Expert Guidance: Regular plans include advice from Certified Financial Planners.
Simplified Investment: Professional management reduces the hassle of fund selection.
Better Tracking: Periodic reviews by CFPs help optimise your portfolio performance.
Direct funds may seem cost-effective but lack personalised advice and ongoing support.

Breakdown for SIP Allocation
Child Education Fund
Start SIPs of Rs 5,000 to Rs 7,000 monthly in diversified equity funds.
Increase SIP amounts every year in line with your income growth.
Invest for at least 10-12 years to build a significant education corpus.
Retirement Corpus
Start SIPs of Rs 3,000 to Rs 5,000 monthly in equity and hybrid funds.
Focus on long-term growth with disciplined investments.
Increase contributions as your financial capacity improves.
Tax Considerations for Mutual Funds
Equity Funds: LTCG above Rs 1.25 lakh is taxed at 12.5%, and STCG is taxed at 20%.
Debt Funds: Gains are taxed as per your income tax slab.
Keep this in mind for better financial planning.
Action Plan
Immediate Steps
Complete the final premium payment for your existing policy.
Start SIPs in mutual funds immediately to benefit from compounding.
Set aside 6-12 months of expenses as an emergency fund.
Long-Term Strategies
Increase SIP contributions yearly to match inflation and growing financial needs.
Monitor your portfolio performance every six months with the help of a CFP.
Ensure adequate health and life insurance coverage for your family’s safety.
Final Insights
Your financial goals are ambitious but achievable with proper planning. Continue your current insurance policy until maturity, and simultaneously begin SIPs in mutual funds. Diversify investments between equity and debt for optimal growth and stability. Consistent monitoring and disciplined investing will help you build a secure future for your children and retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment