WHICH IS A BETTER , SAFE OPTION OF INVESTING FOR MY CHILD’S FUTURE? LIC OR ONE TIME INVESTMENTS IN MUTUAL FUN?



i would like to invest to go for KOMAL Jeevan policy for my 2yr old baby..But the money gets doubled only by 15yrs..I feel its a very less growth..I wish to have an one time investment in mutual fund..Iam 30 yrs old..But afraid to take the risk also..Iam a beginner..I already have SIP.I need ur suggestion in this regard..Also suggest me which compnies do well for one time MF investment..thanks in advance!!

WHICH IS A BETTER , SAFE OPTION OF INVESTING FOR MY CHILD’S FUTURE? LIC OR ONE TIME INVESTMENTS IN MUTUAL FUN?
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9 Replies to “WHICH IS A BETTER , SAFE OPTION OF INVESTING FOR MY CHILD’S FUTURE? LIC OR ONE TIME INVESTMENTS IN MUTUAL FUN?”

  1. Any stock brokerage firm wil give you good advice if they know your goals. Uaually they recommend a 3 way equal split between stock, corporate bonds, and treasuries. You wish both growth and security.Don’t invest in single stocks. Invest in a sound mutual fund. To simplify. 50% in mutual funds and 50% in CDs or treasuries. You can check out these on your PC. By only no load mutuals.



  2. Its great that you are thinking in advance for your child’s future. Moreover you are young and your thought process is going in a right direction.

    Your child is only 2 years of age. If we are discussing about his/her future it means the money will be required not before 14/15 years from now. In other words if you invest your money now, it can stay invested for at least 14/15 years. When you have this kind of time in your hand you can take bigger risks. When I say risk, the fear is not to loose money but how much one can gain.

    If you invest in Insurance Policies, your money is safe. You will never loose. But you will gain not more than 4%-5%. Means @ 5% interest your invested money will take 15 years to get doubled.

    If you invest in Fixed Deposit, your money is safe. You will again not loose. But you will gain not more than 6%-7%. Means @ 7% interest your money will take 10 years to get doubled.

    If you invest is Debt Linked Mutual Fund, your money is comparatively safe. The chance of loosing money is very less. But when we are talking about investment time span of 14/15 years, loosing money in debt schemes is negligible. You can expect average returns of 8%. Means your money will take 9 years to get doubled.

    If you invest is Equity Linked Mutual Fund, your money is at risk. The chance of loosing money is very high. But when we are talking about investment time span of 14/15 years, loosing money in equity mutual fund is very less. You can expect average returns of 12%. Means your money will take 6 years to get doubles. Or it will be 6 times at the end of 16years.

    If you invest is Equity/Shares directly your money is at high risk. The chance of loosing money is very high. But when we are talking about investment time span of 14/15 years, loosing money in shares is very low. Only care you have to take is to invest in companies with very strong fundamentals. In layman’s term select a company which is not going to close in next 14/15 years, which is only going to grow in next 14/15 years. When I talk about companies with strong fundamentals I am talking about Infosys, Tata Steel, Reliance, Tata Motors etc. You can expect average returns of 16-18%. Means your money will take only 4 years to get doubled. Or it will be 14 times at the end of 16years.

    Important is to understand, if you have less time in hand invest in less risky investments. But if you have good time in hand, you can invest in share market / Equity linked mutual funds and feel safe.


  3. When planning for your kids, investments that for long term is good with mix of debt part in portfolio. One best option is select 2 large cap mutual fund and SIP to it for long term. Open a PPF account and add some money to it each month. Buy some stock each year using value investing criteria. Subscribe a child ULIP with waiver options.

    remember, careful selection with controllable but beautiful product is always better for kids portfolio.

    Sherin


  4. its excellent u hve thought abt ur childs future…i would like 2 congratulate u.but i think u should get known abt other LIC plans too.this will give u more options according too your need.its not neccssary that u should invest in name of your child or in child plans for ur child future.u should look at broader prospective.
    ………LIC advisory ,insurance advisor ,tax Planner

    ,future investment…..
    Get known about all the plans of LIC …
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  5. Hi. I’m a Wealth Manager in Inference Wealth Management Services Pvt Ltd. First i would like to tell you that many compaines just for emotional play they name policies as Child plan etc., but in real sense they are same as their other plans. There is a systematic way to reach an investment decision. Since your time horizon is long term it is best if you take equity exposure as over the long period equity has and will give best returns. Now if you can directly buy shares then its best but if you dont have knowledge and time to track your investments then Mutual fund is a good option. If there is any more clarification required then do feel free to email me.



  6. Hi Chitra,

    Congratulations! Not many parents start thinking so early about investing for their kids. So you are on the right path. What you are looking to ensure probably is that you have some bulk funds available every year from the time your child turns 16, till the time he attains 23-24 years of age. To take care of his graduate and postgraduate education.

    You have hit the nail on the head, when you say money doubling in 15 years is too less a growth. Did you know what that means – it means that your money is compounding at less than 5% per year. Why, even a completely safe govt-backed instrument like PPF currently provides 8% compounding per annum – which doubles the money in 9 years!
    Read more about various investment options, compounding rate, returns vs risk, etc. in this article
    http://www.stock-picks-focus.com/why-invest.html

    Most insurance companies claim to cater to investing for kids requirments like yours by way of Children’s Plans (which are nothing but ULIP Plans) where these companies pay a percentage of the sum assured+Bonus at identified intervals. Parents feel secure also because of the Insurance cover component.

    However these plans are not wise investments, because of the high premiums associated. As much as 30% of the premiums go in various costs incl. the agents commission and only 70% of your money gets invested in the Units linked to Insurance Plans, or ULIPs. The huge comissions are not just for the first year but continue for several years before they come down to levels comparable with that charged by Mutual Funds – which seems paltry in comparison – a mere 2.5%. Now if you understand the power of compounding, this itself is a huge reason for you to forget about considering ULIPs.

    I have answered this question specifically – Child Plans or reputed MF here
    http://www.stock-picks-focus.com/investing-for-kids.html

    Cheers
    Donald

    Related Investing Basics Questions-&-Answers, you may like to consider:
    How should I invest to accummulate 50 lakhs in 10 years?
    http://www.stock-picks-focus.com/investing-basics-accummulate-50lakhs.html
    Investing for my son’s (10 months old) career. Best plans suited for me?
    http://www.stock-picks-focus.com/investing-for-kids.html
    How should I invest my money for growth with security?
    http://www.stock-picks-focus.com/growth-investing.html





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