Want to start at SIPs for 20000/- per month for my grandson, who is going to be 5 years shortly so that he gets a corpus for his higher studies by the time he is 18-20 years old. What MFs do you recommend?

Ans: Rs 10000 per month for 13 years can create a corpus up to Rs. 40 lakhs

Rs. 2500 in each per month

1.  Axis ESG Equity fund – Growth
2. UTI Flexi Cap fund – Growth
3. PPFAS Flexi Cap – Growth
4. DSP Quant Fund – Growth

Ans: Hi Akhilesh, thank you for writing to me. As your goal duration is long, your son will see the benefits of compounding.

As your goal seems to be long term wealth creation, I recommend you invest in equity and hybrid funds.

You can consider starting monthly SIP's in:
1-Samco Flexicap Fund- Rs.2,500
2-Edelweiss Nifty 100 Quality 30 Index Fund- Rs.2,500
3-DSP Quant Fund-Rs.2,500
4-HDFC Top 100 Fund-Rs.2,500

Ans: Objective: You want to invest Rs 4000-5000 monthly through SIP.

Time Horizon: You are looking at a 12-15 year investment period for your son.

Why SIP is Beneficial

Rupee Cost Averaging: SIP helps in averaging out the cost of investment by buying units at different market levels.

Disciplined Investment: SIP promotes regular saving and disciplined investment habits.

Actively Managed Funds

Better Returns: Actively managed funds can outperform the market due to expert fund management.

Professional Management: Fund managers make informed decisions to maximize returns.

Diversification Strategy

Balanced Allocation: Allocate investments across large-cap, mid-cap, and small-cap funds.

Risk Management: Diversification reduces risk by spreading investments across various sectors.

Benefits of Regular Funds

Expert Guidance: Investing through a Mutual Fund Distributor with CFP credential provides valuable guidance.

Monitoring: Regular funds are actively monitored and adjusted to market conditions.

Suitable Fund Types

Equity Funds:

Long-Term Growth: Equity funds are ideal for long-term wealth creation.
Balanced Funds:

Stability: These funds provide a mix of equity and debt, offering stability and growth.
Mid-Cap and Small-Cap Funds:

High Returns: Mid-cap and small-cap funds can provide higher returns but come with higher risk.
Actionable Steps

1. Choose the Right Funds

Research: Look for funds with a good track record over the last 5-10 years.
Performance: Check past performance and fund manager's expertise.
2. Start SIP

Set Up: Set up an SIP for Rs 4000-5000 monthly.
Consistency: Ensure regular contributions without interruption.
3. Review Periodically

Monitor Performance: Review your investments at least once a year.
Rebalance: Adjust your portfolio based on performance and market conditions.
Disadvantages of Index Funds

Limited Flexibility: Index funds follow a passive strategy, limiting flexibility.
Market Downturns: They can mirror market downturns without the possibility of active intervention.
Disadvantages of Direct Funds

Lack of Guidance: Direct funds lack professional guidance.
Time-Consuming: Managing investments without expert help can be time-consuming.
Final Insights

Start Early: Starting early helps in compounding your investments over time.
Stay Informed: Keep yourself updated on market trends and fund performance.
Consult a CFP: Consulting a Certified Financial Planner can provide personalized advice and ensure your investments align with your financial goals.
Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: Congratulations on starting this financial journey for your son at such an early age. Investing Rs. 25,000 per month in a SIP is a wise decision. Starting early will give him a strong financial foundation. As a Certified Financial Planner, I will guide you on how to maximize these investments.

Balanced Funds: A Smart Choice
Age and Risk Appetite: At 18, your son has a long investment horizon. Balanced funds are a good choice. They offer a mix of equity and debt, balancing risk and returns. This is ideal for young investors who can take risks but also need some stability.

Growth with Stability: Balanced funds invest in both equity and debt. The equity portion provides growth, while the debt portion adds stability. This combination reduces volatility, making it a safe option for long-term goals.

Rebalancing Benefit: These funds automatically rebalance the portfolio. This ensures that the asset allocation remains in line with market conditions. It’s a great way to manage risk without constantly monitoring the portfolio.

Avoiding Index Funds: Index funds follow the market and might not always outperform. Actively managed balanced funds, on the other hand, have the potential to generate higher returns. A skilled fund manager can make better decisions, especially during market volatility.

The Importance of Professional Guidance
Role of a Certified Financial Planner: Managing investments is not just about picking the right funds. It’s about understanding market trends, risk tolerance, and financial goals. A Certified Financial Planner will provide this guidance, ensuring that your son’s investments are always on track.

Benefits of Regular Funds: Direct funds may seem cost-effective, but they require active management. Investing through a Certified Financial Planner ensures you have expert advice. This can lead to better decisions and ultimately higher returns.

Investment Strategy for Long-Term Growth
Start with a Mix of Equity and Debt: Given your son’s age, the focus should be more on equity for growth. However, a small portion in debt will add stability. This balanced approach is ideal for a long-term investment horizon.

Gradual Shift Towards Equity: As he grows older and gains more understanding of investments, the portfolio can shift more towards equity. This will maximize growth potential as he approaches key life goals like higher education, marriage, or buying a house.

Increase SIP Over Time: Starting with Rs. 25,000 is great, but as his financial situation improves, increasing the SIP amount will accelerate growth. Even a small increment can significantly impact the corpus over time.

Monitoring and Adjusting the Portfolio
Annual Review: It’s important to review the portfolio annually. This ensures that the fund is performing well and aligns with his goals. Adjustments may be needed based on market conditions or changes in his financial situation.

Risk Management: While balanced funds offer a good mix of growth and stability, it’s essential to keep an eye on market trends. If the equity market becomes too volatile, consider shifting a portion of the investment to safer instruments.

Emergency Fund: Ensure that an emergency fund is in place. This should cover at least 6-12 months of expenses. This fund should be separate from his investment portfolio. It acts as a safety net, protecting his investments from unexpected financial needs.

Final Insights
Long-Term Vision: Your son has the advantage of time on his side. Encourage him to stay committed to his SIPs and review his portfolio regularly. This discipline will ensure he reaches his financial goals.

Balanced Approach: Balanced funds are a good starting point. As he gains more confidence in investing, he can explore other options like pure equity funds for higher returns.

Professional Guidance: Regular consultations with a Certified Financial Planner will keep his investments aligned with his goals. This will ensure that his financial journey is smooth and successful.

Best Regards,

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