Lessons from investing for my son’s future for ten years

What I learnt by investing for son's future (education + marriage) for ten years in a combination of mutual funds and PPF

Published: January 31, 2020 at 11:41 am

My son turned 10 a few days 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”.  I am not there yet, but let us just say that the asking rate is comfortably low.

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 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. We are victims of our own experience. 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 (Subra 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.

So, after a rough estimate of UG + PG education, I decided on a target corpus of close to one crore when my son finishes school. Ten years on, this has not changed much (and my actual corpus is not anywhere near). As of now, my son would like to explore (surprise, surprise!) a career in science ahem physics/astronomy. Let us see how this changes.

Exploiting the fungibility of my mother’s cashflow with mine, I opened a PPF account for her. This doubles as a tax-saving instrument for me 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 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 years is nowhere near Rs. 1.5 Lakh. If I had done this, the first casualty would have been asset allocation. So I preferred to pay some tax for my mother.

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 Jan 30th 2020)

  • HDFC Prudence. XIRR 12% Weight: 29%
  • Mirae Large Cap Fund XIRR 12.5%. Weight 37%
  • ICICI Dynamic (ICICI Multi-asset fund) XIRR 12% Weight: 36%
  • Overall portfolio XIRR 11.6%

I have been able to keep the equity allocation close to 60% all through these years. Rebalancing a total of five times – three times into the PPF account and twice into an arbitrage fund (ICICI).

Lessons in this 10-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. Luck is crucial. I have not seen a major market crash in this period.
  3. 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. This allows me to have a high equity exposure in spite of sequence of returns risk.
  4. Increasing the amount invested each year is a huge factor. I am investing three times as much as what I did in 2010. That is a 11.6% year on year increase in the investment amount. This is the hardest. Luck plays a big role here. Any big expense or break in employment can make things difficult.
  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. 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!!

Step-by-step guide to plan for your child’s education and marriage

Do share if you found this useful

Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 700 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2600 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 600 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!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both 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, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? 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 parent’s 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 for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored three print books, You can be rich too with goal-based investing (CNBC TV18), Gamechanger, Chinchu Gets a Superpower! and seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations based on money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements, write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. 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 from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only 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, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
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, 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 199 (instant download)
Free android apps