I want to save for my children’s education, marriage and my pension. how do i do this?

-Balakrishna

Reply to Harshad Chetanwala, Founder of MyWealthGrowth.com

I understand your concerns and it is natural as you are trying to invest through hard earned money for your daughters future and your retirement and you want to be sure of that decision. Before proceeding let me first explain mutual funds as you have mentioned in your question that they are difficult to understand. Mutual Fund is a pool of investments where investors invest in equity or debt with the help of experienced fund managers. These fund managers are experts in their domain who along with their research team will invest in companies based on their vision of companies and the economy. The way we take the help of skilled professionals like doctors, chartered accountants, architects etc. for investments, we can utilize the skills of fund houses and their fund management. So, when you invest in mutual funds you are using domain experts in the investment world to invest on your behalf and grow your money.

The time limit mentioned in your question is more than 24 years for your retirement and 10 years for the education of both your daughters. For such time horizon equity funds work well and can help you build a proper corpus. There is no fixed return in mutual funds, but if we take the example of S&P BSE Sensex over the last 10 years, the average return for investments made for more than 10 years has been around 13% per annum. Also, there has not been a day during this period when 10 years of holding has given negative returns. There is always risk involved in equity investing but when you hold it for a long period this risk is reduced to a great extent. In your case, the holding period is over 10 years and goes up to 24 years.

Whenever you invest in an instrument, you should review it from time to time. While 10 or 24 years is a long time, you should review your holdings at least once or twice a year to see how they are performing. There may be occasions where equity funds seem to be generating losses or low returns, this may be due to market conditions. But having patience and not panic is equally important in equity and equity mutual fund investments. Once the market stabilizes again the total return on your portfolio will begin to improve. Since 2010, there have been 2,717 days out of 2,953, where the BSE Sensex’s 10-year return of over 7% per annum is over 90% of the days. I hope this will give you more confidence in planning your investments with equity funds in future.

Before you start this investment, I would strongly suggest that you build a contingency fund of six to nine months of your monthly expenses in a bank account. Now, coming to where you should invest, even though your risk appetite is currently low, I would suggest you to invest monthly savings 5,000 in Equity Funds because there are three goals that you would like to accomplish with the help of this monthly investment and we have to use the best possible asset class that can generate returns for you and your family. To begin with, you may consider investing only in large-cap funds where investments are made in large and well-established companies. The risk on these funds is low as compared to other equity funds. You Can Do Systematic Investment Planning 3,000 in UTI Nifty Index Fund, 1,000 in Canara Robeco Bluechip Fund and Mirae Asset Large Cap Fund.

If you invest regularly 5,000 every month you will be able to deposit approx 15 lakh at 10% p.a. return and 17.72 lakhs at 12% p.a. return when your elder daughter turns 18 and you need money for her education. You will definitely use a part of this accumulated amount for education and marriage later, so the balance for your retirement may be very less. I understand your responsibilities in present and also in coming years so I suggest you try to increase this monthly investment by 5 to 10% every year if possible, this will help you to make better amount for your goals. will gain help in.

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