How to fund child's education using mutual funds.

If you have more than 10 years on hand, consider using SIP in aggressive equity funds. Otherwise stick to debt oriented funds and balanced funds.

Author of This Article: Renu Pothen
We have all grown up hearing our parents say that their biggest goals in life were to build sufficient corpus for our education and marriage and also to lead a financially independent life in their post-retirement days. Thirty years later, the long term financial goals of a couple in their late twenties are on the same lines. The difference here is that while our parents depended solely on fixed deposits, PPF, EPF and physical gold to meet these goals, we on the other hand have a variety of options at our disposal. However even today, a majority of the investors still follow in their parents footsteps when it comes to planning for their goals. As I write this column, there are data points to indicate that as early as 2013-14, more than 55% of the financial savings of the household sector is being allocated into fixed deposits.

My endeavor in this column is to show investors how mutual funds, whose place in the financial savings of households is a meager 1.8% (2013-14), can be effectively used to achieve one of their long term goals i.e. children’s education. 

Children’s Education
The rising cost of education has become one of the biggest nightmares for parents. Today, the cost of nursery education for a toddler can be in the range of INR 60,000 to INR 3 Lakh annually. In such a scenario, the parents are looking at a college spend that is beyond their imagination. Considering that education costs are increasing at more than 20% per annum, parents need to invest into instruments which will yield the expected returns. Equities are the best option available as they are known to create wealth in the long term. However, given the volatile nature of this asset class, investors would be better off participating in the markets via the mutual funds route. The biggest advantages of investing into mutual funds are that they are managed by professionals who have the expertise in cherry picking stocks and they are also highly diversified across stocks and sectors.

These advantages should be viewed along with the caveat that mutual funds are also subject to volatility.

In the mutual funds space, parents can either create a portfolio exclusively for the purpose of funding their children’s education or specifically invest into children’s plans offered by funds houses. 

While creating a portfolio for their children, parents should follow these guidelines:
• Open a minor account
• Make use of the SIP route for all investments
• If the college enrollment of the child is less than 5 years away, the portfolio should consist of debt and balanced funds
• If the college education is more than 5 years away, an aggressive portfolio consisting of equity funds and one balanced fund will be ideal. A balanced fund is suggested in this portfolio so as to get a flavor of fixed income
• Review the portfolio on a yearly basis. However, if any of the funds have been underperforming for a year, there is no need to press the panic button. If the underperformance continues for 3 years, then the SIP in the fund can be terminated
• Two years before the college education, the entire surplus accumulated in the equity and balanced funds should be moved into debt funds
• Finally, every year there should be an increase in the amount invested via the SIP route. If the portfolio has 9 to 10 good funds, the increased amount can be allocated among the existing funds.

Below table is a portfolio which has been designed for my son’s education in a minor account. The first investment was started in 2013 and as there are more than 10 years for his college education, an aggressive portfolio has been designed for him. 

These funds have been selected on the basis of quantitative and qualitative parameters decided internally. The funds along with the returns have been shown here. However, investors need to remember that past performance should not be the only criterion while selecting funds.

Table1: An ideal portfolio created for a child who has more than 10 years to start college education.

Funds	Inception Date	AUM (31-Mar-2015)	5 yr CAGR	10 yr CAGR
Birla Sun Life Frontline Equity Fund (G)	30-Aug-2002	8843.20	14.94	20.76
UTI-Opportunities Fund (G)*	20-Jul-2005	5403.76	15.19	17.12
IDFC Premier Equity Fund (G)*	28-Sep-2005	7186.46	20.29	22.51
SBI Emerging Businesses Fund (G)	11-Oct-2004	1634.05	19.89	18.67
ICICI Prudential Value Discovery Fund (G)	16-Aug-2004	9075.36	20.57	22.98
HDFC Mid-Cap Opportunities Fund (G)*	25-Jun-2007	9645.80	22.07	17.58
Reliance Small Cap Fund (G)*	21-Sep-2010	1557.97	-	19.84
Reliance Banking Fund - (G)	28-May-2003	2175.47	15.60	21.30
HDFC Prudence Fund - (G)	1-Feb-1994	8317.55	14.58	19.32

*As the funds have not been in existence for 10 years, we have taken the since- inception returns.

Returns are as on May 8,2015.

Note: Some funds in this portfolio have moved out from our recommended funds list. However, the SIPs into the same continue as before.

For parents who do not wish to create an exclusive portfolio for their children, fund houses have an alternative in terms of children’s plans. They have been designed in such a way that parents can decide on the different options depending on their investment horizon.

Table 2: Best Children’s Plans available in the industry

Funds	Inception Date	AUM 31-Mar-2015	5 yr CAGR	10 yr CAGR
HDFC Children's Gift Fund-Investment Plan  (Equity Oriented)	2-Mar-2001	797.65	18.52	16.97
HDFC Children's Gift Fund-Savings Plan (Debt Oriented)	2-Mar-2001	98.44	11.19	10.29
ICICI Prudential Child Care Plan-Gift Plan (Equity Oriented)	31-Aug-2001	296.91	12.63	15.31
ICICI Prudential Child Care Plan-Study Plan (Debt Oriented)	31-Aug-2001	56.73	14.33	13.47

The corpus of these funds is a clear indication that the child specific plans are very small in size when compared to some of the bigger funds from the same fund houses. This means that there is not enough awareness about these funds among investors. We are living in an age where parents are saving for children’s education by investing into child plans offered by insurance companies. If fund houses can create awareness about the plans available with them and improve performance, it is only a matter of time before we see parents flocking to invest into children’s plans offered by the mutual fund industry.

My Take
Parents, it is high time that you make provision for your children’s education and start investing for the same. From the mutual fund industry you can consider either of the two options mentioned above.

Fund Houses, if your children’s plans can mirror the superlative performance of some of your best performing funds, parents will be more than happy to entrust you with their hard earned surplus.

DISCLAIMER 
iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice.

केवल 30 रुपए से बनेगा एक करोड़ , जनिये कहाँ और कैसे लगाएँ पैसा !!

चलिए, मान लें की आप की उम्र 20 साल की है और आप रोजाना केवल 30 रुपए बचाते हैं तो आप करोड़पति बन सकते हैं। जनिये कैसे  !

नौकरी या व्यापार करने के साथ यदि आप बचत के बारे में नहीं सोच रहे है तो यक़ींन मानिए भविष्य में आपको भारी परेशानी का सामना करना पड़ सकता है। लेकिन हाँ यदि आप सही समय और सही जगह पर थोड़ा थोड़ा बचत करके पैसा लगाते हैं मतलब निवेश करते हैं तो आपको अपने भविष्य के बारे में ज़्यादा चिंता करने की जरुरत नहीं है। जो जितनी कम उम्र में बचत करके निवेश शुरू कर देगा वो ही सबसे अधिक फ़ायदे में रहेगा  । मान लीजिए अगर आप रोजाना केवल 30 रुपए भी बचाते हैं तो रिटायरमेंट की उम्र तक आपके पास 1 करोड़ से भी ज्यादा की पूंजी हो सकती है  । दरअसल बात ये है कि एक बेहद छोटे सी रकम को भी आप लंबी अवधि तक निवेश किया जाए तो चक्रवृद्धि ब्याज (Compound Intrest) यानी ब्याज पे ब्याज के कारण सही समय पर किया गया आपका छोटा सा निवेश एक बेहद बड़ीपूंजी में तब्दील हो जाता है ।

आप सोचेंगे कि कैसे और कहां करें निवेश ?

ये सवाल बिलकुल जायज़ है कि आप सोचें पता तो होना चाहिए कि पैसा (Money) कहाँ लगाया जाए। मान लेते हैं कि अभी आप की उम्र 20 साल की है और आपको 15000 रुपए तनख़्वाह मान लें की आप की उम्र 20 साल की है और आप रोजाना केवल 30 रुपए बचाते हैं तो आप करोड़पति बन सकते हैं।

सीधा सा हिसाब है कि 30 रुपए प्रतिदिन बचाने से आपके पास महीने में 900 रुपए की पूंजी हो जाएगी। जानकारो के मुताबिक अब इस पैसे को हर माह सिस्टमैटिक इन्वेस्टमेंट प्लान (SIP) के जरिए डायवर्सिफाइड म्यूचुअल फंड (Mutual Fund) में निवेश करें । अगर आपका फंड सालाना 12.5 प्रतिशत का रिटर्न देता है तो आप 40 साल के बाद 60 साल की उम्र में करोड़पति बन जाएंगे। ये भी बता दें कि बहुत सारे ऐसे फ़ंड हैं जो काफ़ी सालों से 15 % से ज़्यादा की रिटर्न दे रहे हैं इसलिए 12.5 प्रतिशत की रिटर्न हासिल करना मुश्किल नहीं है  । इस तरह का रिटर्न मिलने पर निवेशकर्ता 40 साल में 1 करोड़ से ज्यादा की पूंजी इकट्ठा कर सकता है। अगर आप कम समय में ज्यादा रकम एकत्र करना चाहते हैं तो आपको रोजाना जमा करने वाले पैसे की कीमत बढ़ानी होगी। आप अपनी सुविधा से प्रतिदिन एक निश्चित अमाउंट सेव कर सकते हैं। हालांकि निवेश करने से पहले वित्तीय सलाहकार से अवश्य सलाह लेनी चाहिए।

कैसे धूँड़े अच्छा Mutual फ़ण्ड और कहां  करें निवेश ? इसके लिए बेहद अच्छी और उपयोगी बहुत सी वेबसाइट हैं और तो और काफ़ी मोबाइल APP भी हैं इनमे से आप ET Money  नाम की एक अच्छी APP Download कर सकते है। जिसमें आपको एक क्लिक से निवेश करने में तो सुविधा होगी ही बल्कि आप अच्छे और बुरे म्यूचूअल फ़ंड्ज़ को जाँच परख भी सकते हैं  । बता दें कि  बहुत सारी इन्वेस्टमेन्ट वेब साइट की एक रिपोर्ट के मुताबिक कुछ म्यूचुअल फंड्स के बारे में बताया गया था कि जिन पर लंबे समय की अवधि में निवेश करके अच्छा लाभ कमाया जा सकता है। साल 2017 में इन फंड्स में पैसा लगाना आपके लिए बेहतर साबित हो सकता है।

आइए अब नजर डालते कुछ फंड्स की परफॉर्मेंस पर। प्रिंसिपल इमरजिंग ब्लू चिप फंड ने पिछले साल 17.5% का सालाना रिटर्न दिया था। वहीं, 3 और 5 साल में इस फंड का रिटर्न क्रमश: 31.7 और 27.5 प्रतिशत रहा। दूसरा फंड L&T इंडिया वैल्यू फंड है, जिसका पिछले एक साल में 16.8 प्रतिशत का रिटर्न दिया था ।

इसके अलावा भी बहुत सारे ऐसे फ़ंड्ज़ हैं जो बिना ज़्यादा चिंता के अच्छी रिटर्न देते हैं , लेकिन ये जान लें कि म्यूचूअल फ़ंड्ज़ में आपका पैसा शेयर मार्केट में निवेश किया जाता है इसलिए कुछ रिस्क ज़रूर रहता है परंतु समझदारी से चुने गए Mutual Fund हमेशा अच्छी रिटर्न दे सकते है।

इसलिए आपको निवेदन है के निवेश हंमेशा म्युच्यअल फण्ड में ही करें और जीवन बीमा के लिए भारतीय जीवन बीमा निगम की अमूल्य जीवन पॉलिसी के अलावा कीसी और के बारें मे ना सोचे अन्यथा यह आपकी आर्थिक आत्महत्या होगी ।

आपका शुभेच्छक,

उर्फ प्रसन्न कुमार नेवे ।
फोनः +91-92274 81991

Financial management and Cricket.

Financial management and Cricket.

Cricket and financial activities have many similarities. They are things which go hand in hand. Both these activities aim at achieving goals in a predetermined time. Both have their ups and downs and both have to follow a strategy in order to achieve a goal. There are several things which we can learn from cricket in order to become a good investor.

1. An early start always pays to achieve a high score.

Just like cricket has different rules and regulation for different kinds and formats of the game financial decisions too for different financial instruments need to be regulated in a different way. However, the goal remains the same that is to achieve maximum in the first 15 overs. Just like in cricket scoring maximum in the first 15 overs helps you a lot in achieving the target similarly while investing if your investment earns you maximum returns its will not only give you cushion but also help you with regular growth. The initial period of any investment is like a precious wicket, hence it is very important to make the most when you purchase a new investment. Like losing a wicket at the beginning of the match cost a lot. If that wicket is able to score a huge score of 100 plus in the first 15 overs then it eases the situation and even if you tend to lose a wicket, you play with ease, it’s not that difficult to achieve a high score at the end of 50 overs. This exactly happens with investment; if a security is able to give returns at the beginning of its life it helps you build confidence and also make returns easier.  For instance if you invest Rs 10,000 for 10 years which earns you Rs 4,000 then you can invest all of Rs 14 000 for another 10 years, this will not only provide with you more addition to your corpus but will also guarantee you growth of your investment. This means that the return which you got that was Rs 4,000 acts as an extra saving and hence greater investment.

2. All members have their importance in the team.

Why it is always advisable to build a portfolio which is a right mix of all kind of investments. This can be explained with an example from cricket. Just like a cricket team has a right mix of bowlers, batsmen, fielders and a wicketkeeper who have an important place and a role to play in the match, similarly in case of a portfolio all kind of investments which have different characteristics have their own importance. Imagine a cricket team having only batsman and no bowler. In such a case this kind of cricket team will end up making a huge score but when it come to bowling they won’t have a single bowler, so what would be the advantage of such a big score which will be chased. On the other hand imagine a cricket team having only bowlers and no batsman, in this case they will not have a big score to chase but they will have no batsman who would chase the score.  Therefore it is important to have a portfolio which has a right mix of equity and debt that does well in both short term as well as long term. Therefore after assessing the requirement an investor must have a team of mutual funds, direct equity, ULIPs, Insurance, PPF, other debt products and of course cash. A correct mix of both long term as well as short term investment is required to attain maximum benefit and to avoid risk.

3. You can’t always aim for the boundary, you need to be consistent.

Cricket is a game of thrill and excitement where the maximum enjoyment comes when a batsman hits a six or a four, but such shots come with an equal amount of risk. There is a risk of losing a wicket. Therefore, in order to sustain a high score and to be on the wicket till the last ball one has to be very careful with his 1s and 2s. In fact a consistent batting order which scores 1s and 2s wins the game, rather than a couple of 4s and 6s and the player gets bowled out. Batsman has to concentrate on his 1s and 2s and hit a boundary once in an over or when the opportunity is right.Similarly financial life is also faced with ups and downs, where the market may be in boom and slump in a particular year. Many investors experienced a 50-100 % returns in the year 2010-2011 and suffered losses in the year 2008.There are times that are more beneficial and there are times which make your investment go down in the dumps, in such a caseAlways look for average returns so that you can balance both upturns as well as downturns in life.Don’t get disheartened if there are slow phases in life, catch up when the market is growing, like in cricket hit a six when the bowler is not doing well and exercise caution when the bowler is in full swing.A very good example of it is the World Cup finals between India and Sri Lanka where Indians maintained and let the runs come easy and at the same time also didn’t let the wickets go. And when they realised that they had wickets in hand they took full advantage of this and played some wonderful shots. Therefore they would be some bad times and some good times. A smart investor will balance between bad and good times and average out his earnings.

4. When things go wrong, rethink your strategy.

Things can go wrong at every walk in life, whether it is cricket or finances. In case of cricket, a team can suddenly lose a couple of wickets, can face low run rate or pressure because of great bowling and fielding by the opponent team. This can be a very difficult phase and many times the spectators often feel that the game is over. But it may not be so, because there can be a sudden turn. If the team is headed by a calm and smart captain tables can turn. All you need is to focus, remain patient and think wisely. A situation which is getting out of control can also come back to good state if a good strategy is followed. Some amount of calculated risk has to be taken; if this risk is taken with precision then a lost match can also be won.Similarly in case of finances an investor may suffer loss due to state of the economy, change in taxation rules or merely wrong choice of investment tools. Many investments may not reap healthy and good returns. This may disrupt your goal and also make you face financial challenges but this does not mean that it’s the end of the world. Some professional guidance and expert help can also help getting you back on track. By becoming more alert and by evaluation of financial strategy things can be taken control of and gradually regain financial health.

This is initiative of Financial Literacy  Agenda For Mass Empowerment.

Sincerely yours,

PRASANNA KUMAR NEVE

Indian Real Estate may crash in 2018.

Indian Real Estate Sector may crash by 80% in Pricing/ Depreciation, etc. in 2018. 

It will be welcome step for Middle & Low Income Households.
The Developers/ Private Funds/ AIF will suffer Hugh Losses. 

The above situation is being created by Government of India. This is a long term plan.

Why Indian Real Estate will crash ?

1) It is UN-Organized Sector: The Developers Lack Quality & Standard to develop or Fund major development. (Few Groups in India provide Quality & Commitment-- L&T Group; GMR Tata Group & Few Others).

2) Major Developers are working Hand-In-Hand with Politicians (Mainly Opposition parties or Non-Aligned with present Government). The Corrupt monies of these Politicians are invested in Real Estate to grow. If present Government collapses the Real Estate Sector, opposition Parties will run-out of cash for next Election. No Monies in Election means "Before the Battle starts, war is already Lost".

3) Other Sectors are not developed & neglected for last 10 years. (Manufacturing Sector, ICT, Trading, Ports, Airports, Rails, Service Sector). The Development is not Balanced.

4) Every Tom Dick Harry in India is Developer. (No qualification is required to become a Real Estate Developer).

5) No FDI Funds involved in development of Indian Real Estate Sector (Truth & Fact, Not a single Penny from any Global Funds/ FDI/ HNI are investing in Real Estate Sector--Including our Group).

6) Economical & Financial Data of India reflects, Major Indians can't afford Housing more then USD 100,000/= per 1,000 square Feets of space in Metro Cities. B Grade Cities USD 75,000/= per 1,000 square Feets. Small Towns USD 50,000/= per square Feets.

7) Highest Frauds are commitef in Real Estate Sector in India, but developers are not punished by the Law.(Government of India will set the Ball rolling before election to place most developers in Jail or file as many as fraud cases). Please do go thru & Follow-Up on the Data available with reference to fraud commited by the existing big name developers. Many Medium & Small Developers will disappear from the market sooner rather then later. Major Developers working with Local Politicians will also disappear.

8) Benami property holders or alleged Investors will be arrested by the Government, sooner Rather then Later. The assets of politians will be placed under investigation and the so called Investors will not be able to sell the same.

9) The new Real Estate Regulation & Development Act, 2016 aims at regulating the Real Estate sector. The Rules are being framed under this Central Enactment by every state authority. There will be initial teething problems in implementing this new law & the rules framed thereunder. 

This will further slowdown the growth of Real Estate sector at first instance, probably till end of 2018, and then it will gather momentum.

So, invest in Jeevan Akshay of LIC Of India Instead of other asset classes for regular and guaranteed return.

PRASANNA KUMAR NEVE from AHMEDABAD