Freefincal Q/A: Planning for a child’s education and marriage

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I continue answering reader queries received last week. You can enter your questions in the form below and I will discuss this next week. I encourage questions that require some analysis.

Hi Pattu, This is to plan for new born female child. How to plan for her Post graduation (21 years away) and marriage(26 years away) goals which are greater than my retirement goal.(20 years). I am currently 40 years , planning to retire by 60 years. – Vandhi

I have a detailed guide for new parents here: How to plan for your child’s education and marriage.

Evaluating your insurance requirement is priority number one. Then you can add here to a health cover (separate from employer cover).

The above post discusses where not to invest and how to calculate investment amount. In your case, I suggest that you assume both her post graduation and marriage is 20 years away. That is, once you stop working, you will not longer invest for them.As a first approximation, you can ignore the growth of the corpus from years 20 to 26.

Thank you Mr. Pattu for answering my question. I have read somewhere that people in age from 50-60 years can have equty:debt ratio of 50-50. I will retire at 55 years.

In fact I have read in that retirees should also invest in equity after taking care of 5 years of monthly expenses, emergencies and must do responsible tasks. Remaining they advise to invest in balanced or hybrid funds via SIP only.
From 6th year onwards one can start SWP from balanced funds as per monthly expenses. Or can sell equivalent of 1 year expenses. – Sandeep.

You can check out Mr Sandeep’s first question here: How do I know if a mutual fund has beat its benchmark consistently?

Equity exposure post-retirement depends on the health of the corpus. If it is not enough, then lower the equity, the better.

PLEASE DO NOT  Take that Value Research “advice” seriously. It is extremely risky. One crash and you are done for.

I would suggest you first use the calculator here and then take it from there: When should senior citizens purchase an annuity?

I am a senior citizen 70+ I am having a part of my portfolio ( about 20 % -25% ) in mutual funds both in diversified and ELSS funds. For portfolio rebalancing can I have all my diversified equity mutual funds in balanced funds with equity component of 65 % to 70% and debt component of 30 – 35% . Thanks. – NS Srinivasan.

If you don’t need the tax break, do not use ELSS funds. Balanced funds have a bit lower volatility than diversified equity funds. However, as far as an investment portfolio is concerned, I would recommend treating it as a pure equity fund.

Sir, Could you please explain in detail about MIP of Mutual funds.Minimum lock in period, average realisation, is dividend paid every month.And safety of the capital.And something more which one should be aware before investing MIP – firoz Hajiani.

MIP or monthly income plans are funds that invest in about 10-25% of equity and rest in bonds. I have a detailed post here: How and When to use Mutual Fund Monthly Income Plans.

It has no lock-in period. NEVER opt for dividends from a debt fund. There is a TDS of 28.875%. There is no safety of capital.

Hi Pattu sir, I am aware that you are not a big fan of real estate. However considering if one has a fully paid up house on rent with 3 % rental yield and no plans of selling it for the next 10 years atleast, can that be considered as part of the debt portion of portfolio as there is less volatility involved. Regards. – Prakash.

If you have no plans of selling for 10 years, then for that period, you can, of course, consider the rent as part of your debt portfolio 🙂

1,2,3) How to shortlist UST, Short term Gilt, Arbitrage? 4) NPS tax benefit (carrots) vs returns calculator that includes all withdrawal rules (stick) for salaried… Many cases will be there but my colleagues in 30% bracket, if they use NPS for pure debt (C+G) invest maximum (PF+PPF+NPS will be their debt portion of portfolio) then tax benefit + returns – withdrawal limitations… Is it worth it? 5) How to create a personalized stock portfolio using google sheets? 6) Tried searching freefincal… Similar to Consistency sheet and capture ratio sheet for equtiy is there a sheet for debt funds (all category)? Does it make sense to use such a tool for choosing debt fund? Regards, Vivek.

Q1,2,3:  For those who may not know, Vivek is referring to How to choose debt mutual funds with no credit risk and low volatility

Arbitrage funds see: How & when to choose Equity Savings Funds & Arbitrage Funds

Short-term Gilt: None of these is truly short-term. Check out the DSP BR short term fund. If I am not wrong, only that has the clear mandate to remain short-term at all times.

Ultra short-term (UST): For short-term goals, stick to funds that invest in banking and PSU bonds. For long-term goals, you can consider adding some corporate bonds. See response below.

Q4:  I have an updated illustration here: Do Not Invest Rs. 50,000 in NPS For Saving Tax!

If NPS is offered by the employer (and they contributing!), then perhaps it can be considered. But if there is a choice between NPS and EPF, the latter is better suited for corporate life. The gains from equity is likely to erase NPS tax benefits.

Q5: I assume you got a solution at AIFW? 🙂

Q6: Calculating consistency for debt funds is a waste of time. They beat benchmarks quite easily!

How does Franklin India Ultrashort bond fund super institutional growth fund manage to beat its category over long periods of time ? Do they invest in risky paper or buy undervalued papers ? – Ranjan.

Yes, they invest is bonds that are lower than AAA. Over the last 3Y,  tt is the 38th in terms of risk in a category of 158 funds. That is a decent show (mainly because of no gilts, but not much credit trouble either).  I would use it for long-term goals and not short-term.

I started SIP of 3000 each a year back in the following funds : Birla SL Frontline Equity Franklin India bluechip UTI Equity ICICI Pru Value Discovery Franklin India prima plus All are direct growth plans I do not own a mid cap fund and there are 3 bluechips . Do you think I should substitute a bluechip for a mid cap and if yes then which one ? Investment horizon – 10yr+

For an investment horizon of 10Y, you cannot afford to stay invested all 10Y in these funds. So for about 8Y, a portfolio with large cap tilt is good enough. In any case, I cannot talk about which funds to choose.

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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