Lessons from investing for my son’s future for the last 12+ years

Published: July 30, 2022 at 6:00 am

My son turned 12 a few months ago. I have been investing for his future since Dec 2009 – a month before he was born. Here are some lessons from this journey.

Many years ago, I asked a question in the Jagoinvestor forum, “if anyone has achieved their financial goals using mutual funds, please share your experience”. To this Manish responded, “it is unlikely that any forum member would have done this”. So I told myself, “let me be the first person I know to have done this”.  Technically, I am not there yet, but at least I have hit the target corpus well in advance.

When I started investing for this goal, money management basics were almost in place, except for term insurance which I got a few months later (March 2010). So from day one, investments were made with asset allocation in mind – 60% equity and 40% fixed income. Contrast this with how most of us (including me) plan for retirement: heavy on EPF/PPF and trying to catch up on the equity exposure for several years.

During the last trimester of my wife’s pregnancy, I started thinking about how to start investing for the child’s future. We are victims of our own experiences. It took me a good 14 years after school to land in a “permanent position”. Although my father retired in 1997, and my mother in 2002, both with meagre salaries, they never pushed me to get a job,

So I wish the same for my son. Hence this post: What if our children never had to work! Very few people (Subramoney being one of them) understood what I wanted to say there. I believe parents should provide a strong, wide platform for children to blossom, find themselves and even experiment after school.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

So, after a rough estimate of UG + PG education, I decided on a target corpus when my son finishes school. I was able to cross this target sometime in late 2020 or early 2021. As of now, my son would like to explore a career in physics/astronomy. Let us see how this changes down the line.

Exploiting the fungibility of my mother’s cash flow with mine, I opened a PPF account for her. This doubles as a tax-saving instrument for her and as the fixed income component for my son’s education goal.

As her health worsened, I had to consider the possibility of premature closure of the PPF account. So I opened one more in my son’s name. I neither claim these as “good decisions”, nor do I recommend that. Just stating facts.

To this day, both PPF accounts have never been maxed. That is total investment per account, per financial year is nowhere near Rs. 1.5 Lakh. If I had done this, the first casualty would have been asset allocation.

However, whenever I have a chance to rebalance the portfolio, the PPF accounts are maxed first. This way the risk premium from equity is protected in PPF. See: This useful feature of PPF deserves more attention!

Over time, the amount held in fixed income assets has gradually exceeded the current cost of a UG and PG education. This allows me to take a considerable risk: Why are you holding 55% equity with only six years left for your son to enter college?

But we are getting ahead of ourselves here. Back to the early days of MF investing: For the equity, first, a SIP in HDFC Top 200 was started. A couple of years later I added HDFC Prudence and ICICI Dynamic Fund (now multi-asset).  The Top 200 was shifted to Prudence and Mirae India Opportunities was added at some point. Again merely stating facts. Unlike what many think, no complex calculations were involved in these decisions. Initially, I was planning for his marriage expenses separately but later on merged it with the education goal.

Readers familiar with my yearly financial audits may recall the equity portfolio (updated July 12th 2022)

  • Equity: 55%, Debt: 45%
  • Equity:
    • HDFC Prudence. XIRR 15% Weight: 29.5%
    • Mirae Large Cap Fund XIRR 28%. Weight 13.7%
    • ICICI Dynamic (ICICI Multi-asset fund) XIRR 15% Weight: 42%
    • Overall equity portfolio XIRR 14.6%
  • Debt:
    • ICICI Arbitrage Fund: XIRR 5%, Weight: 31%
    • ICICI Gilt: XIRR: 2%, Weight: 23% (investment less than a year old)
    • Parag Parikh Conservative Hybrid: XIRR: not able able to compute, Weight: 1% (this is only a couple of months old)
    • PPF: Weight 45%
    • Overall debt portfolio XIRR excluding PPF: 4.2%

I have been able to keep the equity allocation close to 60% most of the time reducing it to 55% recently. Rebalancing was done a total of five times – three times into the PPF account and twice into the ICICI arbitrage fund and once into ICICI gilt fund.

Lessons in this 12-year journey

  1. Time is crucial. I had a full 18 years before he finishes school (because he is Jan-born). Starting allows us to take significant portfolio risk. This applies not just to the initial phase of the investment, but also in the latter half.
  2. Goal-based rebalancing/re-alignment is crucial. I have been able to gradually allocate an amount equal to current PG expenses over the last few years. I was able to emotionally handle the March 2020 crash because of this. This also allows me to have a high equity exposure in spite of the sequence of returns risk.
  3. Luck always plays a role in investing but discipline is necessary to exploit it.
  4. Increasing the amount invested each year is a huge factor. I am investing 3-4 times as much as what I did in 2010. That is about a 12% year-on-year increase in the investment amount. This is the hardest part. Luck plays a big role here. Any big expense or break in employment can make things difficult. See: Why increasing investments each year is crucial for financial freedom
  5. Focus is important. Focus on inflation first. Even 10% is an underestimate here. In spite of that, we see people asking, “is X child plan good? The “where to invest” question should start here.
  6. Excluding PPF the XIRR of the total portfolio is about 12.5%. If we approximately include PPF, the total XIRR should be just about 10%. So zero real return. See: Fee-only advisor Avinash Luthria warns real investment returns will be zero!
  7. investing each month based on a system is systematic investing. This investment can be manual or automated but must be based on a plan. Merely automating when money will be debited from a bank account is called SIP.

If you are looking to start systematically, consider these guides:

Want to invest right for your child? Do this simple calculation today with your spouse!!

A step-by-step guide for planning for your child’s education and marriage

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter with the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)