Smart & Advance Way To Start SIPs For Your Child’s Financial Future   May 16, 2018


Are you serious about your children's future?

Of course, I am.

Was this your response?

Please don't get annoyed by the question.

The intent of raising it now wasn't to hurt you.

Quite often it happens that, despite having a good purpose, we end up doing ordinarily in the end.

I want to send my child to a good college for higher studies—Great!

He/she should have an option to pursue a master's programme abroad—Excellent!

And soon after he/she settles abroad, I want to get him/her married in a grand destination wedding—Awesome!

But, are you doing enough to make all this happen?

Thus, saving money for the future needs isn't enough.

Inflation spoils the party.

You need to invest intelligently.

How should you plan for your child's better future?

Estimate the amount you would need in future.

Earmark the amount you will have to invest per month.

Select appropriate mutual fund schemes with a proven track record (or alternatively take expert help in choosing them)

Opt for Systematic Investment Plan (or SIPs) to invest in mutual funds.

And Using various hypothetical rates try to estimate where your investments might take you (You might use PersonalFN's SIP calculator for this purpose)

If you have not been SIP-ping in equity-oriented mutual funds until now, you should start soon!

What is SIP?

Simply put, SIP is a mode of investing in mutual fund schemes in a systematic and regular manner. The method of investing is similar to your investment in a recurring deposit (RD) with a bank, where you deposit a fixed sum of money (into your recurring deposit account), but the only difference here is, your money is deployed in a mutual fund scheme (equity schemes and / or debt schemes) and not in a bank deposit. Hence, your investments (in mutual funds) are subject to market risk.

A SIP enforces a disciplined approach towards investing, and you inculcate the habit of saving before spending, which we all probably learnt when we maintained a piggy bank.

Yes, those good old days where our parents gave us some pocket money, which after expenditure we deposited in our piggy banks and at the end of particular tenure, we saw that every rupee saved became a large amount.

SIPs work on the simple principle of investing regularly, which enables you to build wealth over the long-term. In case of SIPs, on a specified date which can be on a daily basis, monthly basis, or on a quarterly basis, a fixed amount you decide on is debited from your bank account (either through a ECS mandate or through post-dated cheques forwarded), and invested in the scheme as selected by you for a specified tenure (months, years).

Today some Asset Management Companies (AMCs) / mutual fund houses / robo-advisory platforms also provide the ease and convenience of transacting in mutual funds online. They have set up their own online transaction platforms, where one can do SIP investments by following the procedure as made available on the websites.

[Read: How To Invest In Mutual Funds Online]

So, you have fewer hassles while investing as well as tracking your investment dates.

To quote Albert Einstein, the eighth wonder of the world, the power of compounding plays a crucial role in generating a substantial corpus for your child's future.

But, it's important to invest in the right mutual fund scheme. Otherwise, you will wonder about the eighth wonder.

Here are 5 benefits of SIPs:

1. SIPs are light on the wallet

If you cannot invest Rs 5,000 in one shot, that's not a huge stumbling block, you can simply take the SIP route and trigger the mutual fund investment with as low as Rs 500 per month.

SIPs enable you to invest in smaller amounts at regular intervals (daily, monthly or quarterly).

2. SIPs make market timing irrelevant

Timing the market can be hazardous to your wealth and health. Instead, focus on 'time in the market' in the endeavour to create wealth by selecting the best mutual fund schemes to SIP. If you stay invested in a promising mutual fund scheme for the long-term, it can help you accomplish your financial goals.

3. SIPs enable rupee-cost averaging

Volatility is the very nature of the market; but with SIPs, you can mitigate this volatility. When markets undergo turbulence, rupee-cost averaging comes into play.

Meaning, typically buy more units of a mutual fund scheme when prices are low, and buy fewer mutual units when prices are high. SIPs work in your favour when markets go downhill, and when they are flat quite some time.

4. SIPs benefit from the power of compounding

As SIPs subscribe you to the habit of investing regularly, it enables you to compound your money invested.

So, say you start a SIP of Rs 1,000, in a mutual fund scheme following prudent investment system and processes, with a SIP tenure of 20 years and expect a modest return of 15% p.a., your money would grow to approximately Rs 15 lakh.

So, over the long-term, SIPs can compound wealth better and systematically as opposed to investing a lump sum, especially when the journey of wealth creation is volatile.

5. SIPs are effective medium for goal planning

All of us have financial goals – may be buying a house, buying a dream car, providing good education to children, getting them (children) married well, retiring etc.

But all this comes with systematic financial planning. Very often many invest in the equity markets, with a motive of making short-term gains, and often ignore to use the equity markets as a window for long-term wealth creation, to achieve one's financial goals. The earlier you start SIPs the better it is.

Do you know?

A difference of 4.4% compounded annualised returns on your SIP investments can fetch you additional Rs 45 lakh over 15 years?

The power of compounding and smart selection of mutual fund schemes, working in conjunction, can help you grow wealth.

Want a superlative research-backed guidance to select winning mutual fund schemes to plan your child's future needs?

Consider PersonalFN.

PersonalFN has a dependable track record, guiding investors to achieve their envisioned financial goals with its unbiased views.

PersonalFN does not take shortcuts with research before recommending mutual fund schemes to investors. A comprehensive rating methodology is followed.

PersonalFN analyses thousands of data points to shortlist schemes and also applies a whole host of quantitative and qualitative parameters to select winning mutual fund schemes for your portfolio.

PersonalFN's Mutual Fund Research service 'FundSelect' Vs. S&P BSE 200
Mutual Fund Research service
 Data as on March 28, 2018
(Source: ACE MF, PersonalFN Research)

Out of every four funds recommended in the FundSelect — a premium mutual fund research service of PersonalFN, three have always outperformed BSE 200 index. That's the success rate of PersonalFN.

Those who started following PersonalFN's recommendations in June 2003 might have grown their wealth at 21.0% compounded annualised rate vis-à-vis 16.6% returns generated by BSE 200.

Currently, the premium mutual fund research service, 'FundSelect', is celebrating 15 years of wealth creation. If you subscribe now you can avail this premium mutual fund research service for just Rs 2,950 and get 1-year additional access (worth Rs 5,000)... virtually free!

It will provide Buy, Hold, and Sell recommendations... intended at solidifying your mutual fund portfolio and make it free from any bias.

Click here to know more and subscribe to 'FundSelect' today!

You will get FREE access to our premium report, 'Top-5 Funds For 2020'

So, hurry and subscribe to PersonalFN's FundSelect now!

What's more?

PersonalFN is soon launching its robo-advisory platform offering Direct Plans only.

 The lower expense ratio for Direct Plans of mutual fund schemes can add significant wealth in the long-run. The magic of power of compounding works better with Direct Plans.

 You can potentially build a BIGGER corpus by opting for PersonalFN's robo-advisory platform that offers research-backed recommendations.

 So, stay tuned!

Author: PersonalFN Content & Research Team

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