7 rules to keep in mind while investing for your children

01 MAY, 2021

Planning for your child’s financial future is not complicated if you follow these rules

Every parent wants to build a secure future for their child. With the help of a good finance professional and strong financial discipline, it is easy to do so. If you are confused as a parent on how to build a corpus, it would help to go down the SIP (Systematic Investment Plan) route via mutual funds.

Planning for your child’s financial future is not complicated if you follow these 7 rules:

  • Start Early: This cannot be emphasized enough. The earlier you plan for your child’s future the better. A SIP of Rs. 6,000 per month for 21 years at a 10% return will give your child a corpus of Rs. 48.16 lakh in 21 years. That’s a solid foundation for your child’s future education. However, if you delay your SIP by just 5 years, you will have to invest ~Rs. 10,700 every month to hit the same target. If you delay it by 10 years, the amount goes up to ~Rs. 21,000.
  • Account for inflation while planning: An education that costs Rs. 20 lakh today will probably cost Rs. 30 lakh in 20 years. A house that costs Rs. 1 crore today will probably cost Rs. 2-3 crore in 20 years. So you should not be planning for your children’s future with today’s prices in mind.
  • Build a portfolio according to your risk profile: Some investors are very conservative while others are aggressive. Make sure that you explain to your finance professional very clearly the kind of volatility you are willing to accept in your investments. Plan your portfolio accordingly.
  • Increase SIP amounts when possible: If you get a bonus or a more-than-expected increment, use that to boost your children’s SIP. That will ensure that the education loan amount for your child will be less. Or it will result in a higher corpus for your child.
  • Track funds periodically: You have a time period of 15-20 years to build a corpus for your child. Ensure that you are tracking your funds and talk to your finance professional once every year regarding the same. You should know the health status of your investments once a year at least.
  • Take risks early on, switch to less volatile funds later: If you have 20 years to build a corpus for your child, you can consider investing in funds which are high risk-high return, however as you get closer to the goal, you should migrate to a slightly less risks fund. This is needed as investment horizon shrinks and risk appetite reduces. 
  • Funds Should Be Withdrawn in the Last 2-3 years: One should withdraw funds from equity investments and park them in fixed-tenured instruments for the last 2-3 years of the investment horizon. This will ensure that your corpus won’t get affected by a sudden change in the market.

Category / Scheme Name

3 years (INR 1,80,000)

5 years (INR 3,00,000)

10 years (INR 6,00,000)

 

Value (INR)

CAGR

Profit (INR)

Value (INR)

CAGR

Profit (INR)

Value (INR)

CAGR

Profit (INR)

Large Cap Funds

 

 

 

 

 

 

 

 

 

Axis Bluechip Fund

2,34,817

18.09%

54,817

4,49,388

16.19%

1,49,388

13,14,561

15.00%

7,14,561

ICICI Prudential Bluechip Fund

2,32,214

17.30%

52,214

4,18,903

13.33%

1,18,903

12,12,227

13.48%

6,12,227

Kotak Flexicap Fund

2,32,055

17.25%

52,055

4,20,707

13.51%

1,20,707

13,47,333

15.46%

7,47,333

Mirae Asset Large Cap Fund

2,32,776

17.47%

52,776

4,28,198

14.22%

1,28,198

13,71,055

15.78%

7,71,055

 

 

 

 

 

 

 

 

 

 

Multi Cap Funds

 

 

 

 

 

 

 

 

 

Kotak Equity Opportunities Fund

2,45,999

21.42%

65,999

4,41,670

15.48%

1,41,670

13,45,108

15.43%

7,45,108

Invesco India Growth Opportunities Fund

2,28,823

16.26%

48,823

4,20,683

13.51%

1,20,683

12,63,570

14.26%

6,63,570

Sundaram Large and Mid Cap Fund

2,29,050

16.33%

49,050

4,18,335

13.28%

1,18,335

12,42,337

13.94%

6,42,337

 

 

 

 

 

 

 

 

 

 

Multi Cap Funds with Large Cap Bias

 

 

 

 

 

 

 

 

 

Axis Focused 25 Fund

2,38,703

19.26%

58,703

4,49,911

16.24%

1,49,911

-

-

-

SBI Flexicap Fund

2,36,302

18.54%

56,302

4,22,061

13.64%

1,22,061

13,40,058

15.36%

7,40,058

 

 

 

 

 

 

 

 

 

 

Mid Cap Funds  

 

 

 

 

 

 

 

 

 

Kotak Emerging Equity Fund

2,66,687

27.33%

86,687

4,70,392

18.06%

1,70,392

16,74,296

19.49%

10,74,296

DSP Midcap Fund

2,48,196

22.06%

68,196

4,41,876

15.50%

1,41,876

15,17,763

17.67%

9,17,763

 

 

 

 

 

 

 

 

 

 

International Funds

 

 

 

 

 

 

 

 

 

Franklin India Feeder - Franklin U.S. Opportunities Fund

2,77,328

30.26%

97,328

5,67,213

25.81%

2,67,213

-

-

-

 

 

 

 

 

 

 

 

 

 

Indices 

 

 

 

 

 

 

 

 

 

Nifty 50 TRI

2,36,250

18.52%

56,250

4,36,172

14.97%

1,36,172

11,96,817

13.24%

5,96,817

Nifty Midcap 100 TRI

2,56,465

24.45%

76,465

4,36,850

15.04%

1,36,850

13,28,645

15.20%

7,28,645

S&P BSE 200 TRI

2,42,551

20.39%

62,551

4,43,953

15.69%

1,43,953

12,57,172

14.16%

6,57,172

Data as on 30th April, 2021 | Source: MFI explorer

Click here to start your investment journey today.

Disclaimer:Mutual fund investments are subject to market risks, read all scheme related documents carefully. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.