Top 5 investment options to secure the future of your children | The Financial Express

Top 5 investment options to secure the future of your children

Choosing the investment product for your child’s future depends on their age and life goal. The investment portfolio should be reviewed regularly and adjusted in sync with factors such as inflation, goal change, risk appetite, etc.

Top 5 investment options to secure the future of your children
Equity mutual funds can help you increase the ROI on your child's investment portfolio.

Investment can have multiple goals. It could be buying a house or car or securing your children’s future so they can easily sail through their lives. One should start early while investing. It is also essential to diversify the investment, keeping in mind the requirements of your children.

Here are the top 5 investment instruments that can help secure your children’s future.

Small Savings Schemes

Small saving schemes such as Sukanya Sammriddhi Scheme (SSS), Public Provident Fund (PPF), National Savings Certificate (NSC), etc., can offer a decent return in the long run while keeping risk exposure at a low level. Small saving schemes offer a high level of safety and a decent return in the long term. You may choose a small saving scheme in sync with your children’s age and financial goals. For example, if you are planning to invest for your girl child’s marriage who is below the age of 10, you may invest in SSS. If you want to invest for a child’s higher education, you may diversify investment into PPF, NSC and post office fixed deposits.

Equity Mutual Funds

Equity mutual funds can help you increase the ROI on your child’s investment portfolio. Equity mutual funds can offer a high return, but at the same time, they carry a higher risk. So, you can opt for equity funds to achieve long-term goals. SIP can be a good option to lower the risk and to get the benefit of Rupee cost averaging. While investing in an equity fund, diversify investment across different mutual fund companies and into different categories of equity funds. For example, you may invest in large-caps for mid to long-term goals and small and mid-cap funds for long-term goals.

Recurring and Fixed deposits

While investing for your children’s future, you should also focus on creating a contingency fund that you can use to meet financial emergencies related to your child. For example, you may need a contingency fund to bridge the funding gap when taking an education loan, to pay the medical bills if there is a health emergency and a cashless insurance claim is not available and for many such situations. You may invest in fixed deposits to maintain the contingency fund. If you plan to create a contingency fund in the next few years gradually, you may invest in the bank RDs. Currently, the bank’s deposit interest rate is going upward, so you may choose an FD with a shorter maturity or opt for an FD laddering. RD or FD can offer you a high level of liquidity which is essential when managing the contingency fund.

Also Read: Housing costs: Tips to reduce your rental expenses

Invest in Sovereign Gold Bond (SGB)

In the past many years, gold has proven to be one of the best hedges against inflation. You can invest in gold through SGB as they offer you an interest of around 2.5% pa on the face value and capital appreciation. To invest through the SIP mode, you may invest in Gold ETFs.

Invest in ULIP

You can invest in Unit Linked Investment Plan (ULIP) while choosing allocation in the debt and equity portion in sync with risk appetite and return requirement. ULIP also offers life insurance benefits and tax deduction advantages u/s 80C. ULIP can be a perfect option for long-term investors looking for multiple benefits in a single investment product.

Things to keep in mind

Choosing the investment product for your child’s future depends on their age and life goal. The investment portfolio should be reviewed regularly and adjusted in sync with factors such as inflation, goal change, risk appetite, etc.

Adhil Shetty, CEO, Bankbazaar.com, says, “When it comes securing your children’s future, you must structure your investments keeping in mind your financial goals like their education, marriage etc. It is wise to start taking small steps now towards these goals to avoid financial stress later. You can divide your goals into small, monthly steps you need to repeat for many years. These steps are essentially mutual fund SIPs. Index fund SIPs are also a great way to achieve market-linked returns over the long-term, which help you achieve difficult goals such as creating your child’s college fund. You can choose equity funds depending on your goals and risk appetite. You can also diversify into bonds as you get closer to the goal. Don’t forget to estimate inflation while investing for any long-term goal.”

Children’s investment portfolios should be adequately diversified, and if you need help planning investment for your child, feel free to take the help of a registered investment advisor.

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First published on: 22-11-2022 at 12:25:30 pm
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