New Delhi: It is Father’s Day on Sunday, June 16, 2024. Nowadays, one of the primary responsibilities of a father is to build assets for his kid. On the eve of a special day, you could take the following steps to brighten the future of your loved one. Considering that creating assets for a kid’s future is essentially a long-term financial goal, the most effective and convenient instrument is mutual fund investment.
If you can invest even a small amount in a disciplined manner over a long period of time, it creates a neat corpus that can not only help your child in paying for higher education but also part fund a business.
Systematic investment plans (SIPs) that allow you to invest in mutual fund schemes of your choice in a pre-determined time interval are the optimum mode of creating assets over a long period of time. Most important, unlike guaranteed-return debt instruments, mutual funds allow one to beat inflation without undertaking the risks of direct exposure to equity markets.
The periodicity of SIPs for mutual fund investment can be selected according to your convenience – once a month, once a week or even every day. The money will be debited from your nominated bank account and you will have nothing to do except ensure that the amount that will be invested should be there in your account for smooth investment.
Never too early to invest in MFs
How early can one start investing for one child? The answer is as soon as you get a few basic documents such as Aadhaar and PAN done. Edelweiss Asset Management Company CEO Radhika Gupta has a specific advice for you. “Do monthly SIPs. 2-3 funds work. Can use a large/mid index fund for broad market exposure, mid and small cap funds to add risk, and an international fund if you are thinking study abroad to manage currency.”
Investment strategist and Plexus Management Services CEO Prasunjit Mukherjee, says that there is no period in the Indian stock market history when the markets were down for extended periods of time. “If you invest in chosen mutual funds and continue doing it for 15 years or more, there is no way that the markets are going to disappoint you,” says this market veteran.
Gupta also advises selecting a goal such as higher education to set a very tangible target. “Break it down into the number of years you have to figure out an investment amount,” she said.
Documents required for mutual fund investment
Soon after birth, as you get the birth certificate, one can easily get an Aadhaar card and PAN made. These documents will enable the father to open a bank account in the name of the minor. These documents are important to start mutual fund investment for your child.
While one can certainly invest in equity or debt funds depending on your risk appetire, there are some children’s funds in the market too to choose from. These funds are designed for child-related goals and terms such as addressing the rising cost of higher education.
Child plan funds invest in both equity and debt portfolios. Funds for children usually carry a minimum lock-in period of five years, which prevents an investor from withdrawing funds before they mature. However, if one chooses funds that do not fall within this category, there is no lock-in period.
Small but disciplined
Mutual fund investment for 15 years or more, even a small amount can create a cool sum. Consider this, starting this Father’s Day 2024, a monthly investment of Rs 2,500 over 15 years (considering a very average 12 per cent return) fetches you a total amount of Rs 19.13 lakh when your kid becomes an adult, provided you begin investing from the very first year.
If you double your monthly SIP amount to Rs 5,000, the amount turns Rs 38.27 lakh and if you manage to put in Rs 10,000 a month, the amount jumps to Rs 76.54 lakh. Gupta advises that one should, after every few years, review the investment since goals can keep changing as a child grows up.
In India SIP has easily become the tool of investment for the common person. In April, mutual fund inflows through the SIP route crossed Rs 20,000 crore for the first time to reach Rs 20,371 crore. In May, mutual fund SIP inflows rose to Rs 20,904 crore.
(Disclaimer: This article is only meant to provide information. News9live.com does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
This Father’s Day, consider starting a mutual fund to build assets for your child by exploiting the miracle called compounding. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
