Over the past two decades, there has been a structural shift
in the concept of a family. A large proportion of joint families has gradually
transformed into multiple nuclear families. This shift has been due to many
factors like opportunities across India and the world, the rising purchasing
power and, hence, affordability, higher influence of the western cultures, etc.
Despite this shift, the Indian parents' thought process about fulfilling their child's dreams has remained the same. The emotional bonding with children still remains far stronger than in most of the western and east Asian countries.
As a child grows, day-to-day needs and pleasures evolve into bigger event-based expenses. These events could be education, business, marriage or assisting your children with buying a house. To achieve these aspirations, meticulous and scientific planning is required to make sure that you don't have to make compromises in providing for your child. The future is uncertain, especially in terms of the economy. But what we do today for the sake of our children's future will count a lot later.
When the prices of a kilo of some vegetables have crossed Rs 100, one is tempted to ask a simple question: "How will I invest in various investment avenues to balance my risks and returns with my small savings every month?" The answer is simple - mutual funds.
There are no other products that can give you an easier, more efficient, operationally convenient and, most importantly, an option for small size investments. When you give your child a mutual fund you will not only be giving them a gift that continues to grow or accumulate over the years but you will also be helping them to teach about finances and the benefits of investing their money.
Mutual funds invest in a variety of shares of blue-chip corporates with marginal risk, high-return fixedincome instruments, real-estate, bonds and the most favoured asset class now - gold. No one can predict how the stock markets will behave in a given year, much less predict where the stock market will be a few years down the line. This doesn't mean that we are powerless. We have a tool called asset allocation to counter the uncertainties of the markets.
Asset allocation refers to how one divides his or her money among different asset classes and can be seen as a map to reach the financial destination in a stipulated time to fulfil your child's dream. Mutual funds are diversified in nature and asset allocation is inherent in them, which makes them a great investment avenue for our regular savings.
Mutual funds are both professionally managed and easy to liquidate. You can start investing in them with as little as Rs 500 or start a micro SIP of as low as Rs 100. By increasing the allocation to riskier asset classes like equities, we can increase the expected returns.
The avenues of variable returns, mutual funds and Ulips for example, may not give you fixed returns like bank deposits, but over a long tenure, these products have out-performed deposits or fixed return products. In the last 10 years on an average, fixed deposits have given 7.2% CAGR, while equity indices (Sensex) have given over 16% and gold has given over 18.5% CAGR returns.
Despite this shift, the Indian parents' thought process about fulfilling their child's dreams has remained the same. The emotional bonding with children still remains far stronger than in most of the western and east Asian countries.
As a child grows, day-to-day needs and pleasures evolve into bigger event-based expenses. These events could be education, business, marriage or assisting your children with buying a house. To achieve these aspirations, meticulous and scientific planning is required to make sure that you don't have to make compromises in providing for your child. The future is uncertain, especially in terms of the economy. But what we do today for the sake of our children's future will count a lot later.
When the prices of a kilo of some vegetables have crossed Rs 100, one is tempted to ask a simple question: "How will I invest in various investment avenues to balance my risks and returns with my small savings every month?" The answer is simple - mutual funds.
There are no other products that can give you an easier, more efficient, operationally convenient and, most importantly, an option for small size investments. When you give your child a mutual fund you will not only be giving them a gift that continues to grow or accumulate over the years but you will also be helping them to teach about finances and the benefits of investing their money.
Mutual funds invest in a variety of shares of blue-chip corporates with marginal risk, high-return fixedincome instruments, real-estate, bonds and the most favoured asset class now - gold. No one can predict how the stock markets will behave in a given year, much less predict where the stock market will be a few years down the line. This doesn't mean that we are powerless. We have a tool called asset allocation to counter the uncertainties of the markets.
Asset allocation refers to how one divides his or her money among different asset classes and can be seen as a map to reach the financial destination in a stipulated time to fulfil your child's dream. Mutual funds are diversified in nature and asset allocation is inherent in them, which makes them a great investment avenue for our regular savings.
Mutual funds are both professionally managed and easy to liquidate. You can start investing in them with as little as Rs 500 or start a micro SIP of as low as Rs 100. By increasing the allocation to riskier asset classes like equities, we can increase the expected returns.
The avenues of variable returns, mutual funds and Ulips for example, may not give you fixed returns like bank deposits, but over a long tenure, these products have out-performed deposits or fixed return products. In the last 10 years on an average, fixed deposits have given 7.2% CAGR, while equity indices (Sensex) have given over 16% and gold has given over 18.5% CAGR returns.
This makes it imperative for all investors to diversify
across all types of investments with the help of proper asset allocation. Now
let's elaborate this with the help of an example. Suppose, in future, the
returns from the three asset classes are similar to the ones mentioned above,
then over the next 10 years, a one-third allocation to each asset class will
give a 14% return.
Every investor has his/her own objectives, constraints, time horizon and unique circumstances that need to be considered when trying to create an asset allocation model: a younger investor can take lesser exposure towards bonds while an older investor needs to increase the percentage of fixed income products, with an automatic decrease in percentage of equities.
Hence, with the increasing cost of education and the huge expenses involved in marriages, it becomes imperative and prudent to start saving early and investing regularly for your children's dream to safeguard their future. We have to ensure and plan accordingly that the desired funds for our children's future goals are available with us when they are required.
Every investor has his/her own objectives, constraints, time horizon and unique circumstances that need to be considered when trying to create an asset allocation model: a younger investor can take lesser exposure towards bonds while an older investor needs to increase the percentage of fixed income products, with an automatic decrease in percentage of equities.
Hence, with the increasing cost of education and the huge expenses involved in marriages, it becomes imperative and prudent to start saving early and investing regularly for your children's dream to safeguard their future. We have to ensure and plan accordingly that the desired funds for our children's future goals are available with us when they are required.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/mutual-funds-are-the-best-option-to-fulfil-your-childs-aspirations/articleshow/10320416.cms?curpg=2
Posts
No comments:
Post a Comment