Page 13 - Value Plus Jan 2016

If you chose to invest in equity 5.
funds for long term say over ten
years, you can expect a return
of 13% - 14% pa, however in
short-term your investment can
even deliver negative return. As
each individual has a different
level of risk appetite you need
to understand how much risk
you are ready to take. For your
child’s long term needs, it is
recommended to invest a higher
portion of your money in equity.
3. Asset Allocation: Depending on
your risk appetite and investment
horizon you can choose different
mix of products spanning across
asset classes like bank FD, debt
funds, direct equity, equity funds,
gold and gold ETFs. You should
avoid traditional child insurance
plans, ULIPs and bank/post
office fixed deposits because post
tax returns on these investments 6.
are not able to beat the inflation.
Under fixed income you can
consider investment in:
• public provident fund (PPF)
which gives post tax return of
8.7% p.a.(current rate)
• Sukanya Samriddhi account, for
girl child, which gives post tax
return of 9.2% p.a. (current rate).
Under equities you can choose
equity mutual funds and under 7.
gold you can choose gold ETFs.
4. Decide monthly investment
amount: With the help of a
financial planner, or by yourself,
you can decide how much money
you need to invest every month
to achieve the targeted amount
you need for your child at various
stages of their lives. Say you need
Rs 47.5 lacs after 15 years for your
daughter’s college education, first
you need is to estimate return on
your investments. Assuming the 8.
expected return is 12% pa, then
you need to invest Rs 9,987 per
month to achieve the targeted
amount.
LEARN MORE
Talk to us about child planning.
Call 9406683366 or Email us
at fp@arihantcapital.com for
arranging child planning session.
Start as early as possible:
Delaying investment for child
education can compel you to take
undesired risk or compromising
with your other goals which is
not recommended. Let’s assume
you need Rs 47.5 lacs after 15
years and you can generate 12%
p.a. return on your investments.
If you choose to start investing
today you will have to save Rs
9,987 p.m. even if you decide to
invest only for initial 10 years
then also you will need to invest
only Rs 12,039 p.m. Whereas
if you delay your investment
by 5 years you will have to
save Rs 21,210 pm to achieve
your targeted amount. So start
investing as early as possible
to get benefit of power of
compounding.
9.
Rebalancing: If you choose to
invest in high risk investments
such as equities/ equity mutual
funds then before 3-4 years of the
goal year you should start shifting
your investments in safe avenue
like bank FD or debt funds and
bonds so that market volatility
does not affect your goals. Your
investment planner can help you
rebalance your portfolio.
Get Insured: Life is full of
uncertainties, and it is imperative
that you secure your child’s
future. You should take pure term
plan (life insurance), accidental
insurance, disability insurance
and critical insurance of adequate
sum assured so that even in the
unfortunate event of premature
death, disability or critical illness
your child’s future remains
protected.
Estate Planning: You should
also consider writing a WILL
early on so that assets and
insurance amount which you
have allocated for your children
can be utilized for their benefit.
While writing your WILL you
should also mention who will be
the guardian of your children in
case of premature death of both
the parents. If you fail to appoint
guardians in your WILL, the
decision to appoint the guardians
goes in the hands of the courts
Managing and
optimizing your
investments may
be a very complex
exercise. To help
those who lack the
time and expertise
when it comes to
investments, our team
of experts can help
you with planning
child’s future.
but they won’t necessarily choose
the people that you would have
preferred to take care of your
children.
By appointing guardians you
can ensure that your children
are looked after by the people
that you have chosen as the best
people for the job.
Creating a child trust for tax
saving: For taxation purpose,
income of minor child is clubbed
in the income of the parent whose
total income is higher, hence
attracting higher taxes. However
if a one hundred percent
beneficiary trust for a minor is
created with the provision of
deferment of the benefit until
the child is a minor child then
income arising in this trust would
not be clubbed with the income
of father/mother of the child.
Trust route will not only help you
save substantial taxes but is also
helpful in clearly demarcating the
funds for children.
The bottom line...
Time is your strength when
you are trying to save, so start
investing early and make sure
to take proper tax planning into
consideration. More importantly,
invest in the right product and
do not get lured by the emotional
advertising used by the financial
companies.
13 ARIHANT CAPITAL ¡ JANUARY 2016