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Sanjeev Govila | Answer |Ask -Follow

Financial Planner - Answered on Feb 10, 2024

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives, a financial planning company dedicated to the armed forces personnel and their families.
He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.... more

Question by Amit on Feb 01, 2024Hindi

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: Deciding between using your mutual fund investments or a student loan for your son's abroad education requires more details like estimated education cost, living expenses, travel expenses, etc.

By considering your inputs, here are some pros and cons:-

Using portfolio for education:-

Pros:- As you have been investing in a mutual fund for the last 2 years, assume that your portfolio is generating potentially higher returns compared to loan interest rates, and in the long-term horizon (5-7 years) your portfolio becomes stabilized and the compounding helps to creates a good corpus for your future goals.

Cons:- If you withdraw the portfolio now, it will affect the compounding and the generated capital gain is taxable & it may also incur the exit load. In the short-term horizon, fluctuating markets might impact the value of the portfolio, potentially falling short of education costs.

Take Education Loan:-

Pros:- Lower interest rates are set off with the portfolio returns and it also provides suitable repayment options. It offers benefits like tax deductions.

Cons:- Add the financial burden on you, if you repay the loan and if your son repays the loan it becomes a debt for him after the completion of education but it also creates a sense of responsibility for your son and he experiences how to manage the finances.

We have explained you to the pros and cons of taking an education loan or using a portfolio for the same. To decide the same please calculate the estimated cost of education and also consider the portfolio return and education loan interest rate.

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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Fund Name	Last price date	Last price	Total cost	Current Value	% of Total	Total Return	Return % pa	Remarks
ICICI Pru US Bluechip Eqt Dir-G	2021-02-25	₹ 42.05	₹ 321,485.55	₹ 356,905.85	18.6	₹ 36,445.70	29.1	Bulk switch over from ICICI Multi asset fund in which I had SIP since 2017 of Rs 1,60,000/- on 28 Aug 20 & Rs 75,000 on 04 Sep 20. SIP @1000 per week from 28 Aug 20. *Also switch in from ICICI gold Rs 50,000/- on 04 Dec 20*
Motilal Oswal Nasdaq 100 FOF Dir-G	2021-02-25	₹ 20.35	₹ 84,346.33	₹ 95,999.57	5	₹ 11,653.24	32.3	Started with bulk investment of Rs 50,000/- on 22 Jul 20 & SIP @1250/- weekly since Aug 2020. I am also holding 100 sahres at buying average of 812/- in the ETF of this fund in my demat acct
Kotak Gold Dir-G	2021-02-25	₹ 19.91	₹ 75,996.44	₹ 71,531.64	3.73	-₹ 4,464.81	-11.5	Started with bulk investment of Rs 50,000/- on 10 Jul 20 & SIP @3000 divided into tranches of 1000 on three days a month. Using this as Hedge for a longer period
Axis Bluechip Dir-G	2021-02-25	₹ 43.60	₹ 109,087.41	₹ 143,205.60	7.46	₹ 41,208.95	40.2	SIP @4000 per month in the fund since 2015 and encashed in 2109 but SIP continuing. SIP divided into three tranches of 1000, 2000 & 1000 on 01st, 10th & 20th of month respectively
SBI Focused Eqt Dir-G	2021-02-25	₹ 204.70	₹ 289,178.57	₹ 377,724.67	19.69	₹ 95,560.86	54.3	SIP @3000 per month in the fund since 2019 and. SIP revised to 5000 per month since Mar 2020 SIP divided into four tranches of Rs 1250/- on 1st, 8th, 15th & 22nd of every month. Done bulk investment by switch from SBI Blue Chip Direct growth of Rs 1,44,844 (accumlated thru SIP of Rs 4000/- per month from Jun 2017 to Jul 2020) on 13 Jul 20 & SBI MAgnum Gilt of Rs 50,000/- on 15 Sep 20
Kotak Emrgng Eqt Dir-G	2021-02-25	₹ 62.45	₹ 81,727.75	₹ 95,071.60	4.96	₹ 13,343.87	113.5	Started on 07 Dec 2020 by switching in 65000/- from Kotak Gilt. SIP @Rs 1000/- on 04th, 11th, 17th, 24th and 30th of the month
Parag Parikh Flexi Cap Dir-G	2021-02-25	₹ 39.73	₹ 29,999.50	₹ 33,768.49	1.76	₹ 3,768.99	75.8	Started on 29 Oct 2020 with initial investment of Rs 10,000 wef 29 Oct 2020 & SIP of Rs 5000/- divided into four tranches of Rs 1250/- on 10th, 15th, 20th & 25th of every month
DSP Eqt & Bond Dir-G	2021-02-25	₹ 219.73	₹ 14,000.00	₹ 14,849.95	0.77	₹ 849.95	54	Started in Dec 2020 with a SIP of Rs 4000/- divided into four tranches of Rs 1000/- each on 01st, 07th, 14th & 25th of every month
Mutual Funds			₹ 1,005,821.55	₹ 1,189,057.37	61.98	₹ 198,366.75	40.1

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:

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