Click to play videoNew Delhi: In these taxing times of rising inflation, investing in the future of your children is a good option.
IT Professional Aman Sehgal is a father of a two-year-old girl and he says he wants only the best for her.
“I'm primarily looking at a long-term investment which would take care of my daughter’s needs. See, now we have grown from two to three so I'm looking at her higher education, her wedding, long-term plans so that we can move into a bigger place,” he said.
When making investments for your children, two things should be considered:
The golden rule of investment is to invest 10 per cent of your annual earnings for your child’s future.
Also, while planning an investment, you need to decide whether you are investing for the long term or short-term.
For those investing in the long term – say, 15 to 20 years – you can go for higher risk and allocate 60 to 70 per cent of your funds in equity and the remaining 40 to 30 per cent in debt. Although, theoretically, equity means high risk but in the long-term, your risks will be considerably reduced.
On the other hand, while investing for the short term – say, 5 to 8 years – you will have to change the equation and invest 60 to 70 per cent of your funds in debt, like monthly income plans (MIPs) and the remaining 40 to 30 per cent in equity.
“If we were to construct a portfolio for a child, then we will use investments like ULIPs, mutual fund SIPs for the long term with a minimum of 5 years horizon, and monthly income plans of mutual funds which are essentially asset allocation products, which put 80 per cent in debt and 20 per cent in cash. So, over a 2-3 year horizon, you can target a return of 11-13 per cent,” explained investment planner, Rajeev Bajaj.
While planning for your child’s future, five points need to be kept in mind:
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