Will Your Planning Be Good Enough to Let Your Child Study in a Good College?

Every parent wants to provide the best education for their children. However, the high cost of education in private institutions and the higher rate of inflation in the educational sector make it difficult for many parents to do it comfortably.

According to the Ministry of Statistics and Programme Implementation, the education inflation rate in India was 0.63 percent in April 2021 and 1 percent in May 2021, but has increased to 4.12 percent and 4.09 percent (provisional) in the corresponding months of 2022, respectively, making the education inflation more than 10% per year compounded. To ensure that the available money doesn’t fall short of the requirement, parents need to look at the following issues carefully if they have to meet this important goal in their life:-

  • Start saving early to counter education inflation: For compounding of wealth to work its magic, it needs time. Starting the saving when the child is young gives us (the parents) advantage of time. Regular investment in a higher-yielding asset like equity for a long term provides the required returns to achieve such a goal.
  • Student Loan: Loans help to fill the gap between the finances available and the finances required. Such loans generally provide flexibility in repayment and also tax benefits on interest paid. Interest on an education loan is eligible for tax rebate under Section 80E of the Income Tax Act 1961 without any limit.
  • After-education pay: Many loaning agencies allow EMIs to start after students complete their study programme so that one doesn’t have to worry about repaying immediately.
  • Easy repayment terms: Certain banks offer very reasonable interest rates on education loans and even give preferential rates for top-ranked universities and institutes. A good research is required by the parents to get the best bargain.
  • Building financial prudence: Taking on an education loan is a great opportunity for your child. It creates a sense of worthiness when they pay for their own education, without the need to depend on family. Besides this, they also start building their credit history. A good credit profile will help them get cheaper loans in the future.

(Contributed by Kritika Saini, Relationship Manager, Team Arjun)

How Good an Investment Portfolio Are You Creating?

An investor’s journey is always interesting. However, it is a long and testing path that one has to travel alone by keeping the emotions under control. Now the question arises: how can we make sure that this journey is successful? The answer is to create a good investment portfolio.

An ideal investment portfolio is the one that we can continue year after year without much changes and churning. Let’s discuss what an investment portfolio should look like and how to build it.

Leading with purpose

The disciplined approach to investing begins by focusing on certain factors that will serve as pillars for your investment decisions. Identify your future financial goals, investment horizon and risk-taking capacity before anything else.

The next step is to divide the portfolio into two asset classes: equity and debt. By equity, we mean equity mutual funds and maybe stocks.
As an investor, market trends and euphoria will never stop chasing you (or is it the other way round!). So, within stocks, we have two categories: Core Portfolio for stable stocks and Satellite Portfolio for trendy sectors. To reduce your burden of choosing stocks and following active management by the fund managers, there are active and passive mutual funds that help you keep your goals intact.

Last but not the least, we never know when a tough time is ahead. Therefore, keep your debt investments in place and get a risk-free fixed return. In the debt class, it is always recommended to invest in tax-efficient debt mutual funds, supplemented with corporate FDs and bonds, rather than choose tax-inefficient traditional avenues.

Build an ideal investment mindset to build an ideal investment portfolio.

(Contributed by Ayushi Gupta, Associate Financial Planner, Team Arjun)

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Don’t Let Lack of Discipline Ruin Your Wealth Creation Process

Everyone has certain goals and desires in life, and it is a well-known fact that achieving success requires proper discipline and determination. Even your child needs discipline and constant monitoring to achieve his/her goal of being a good student. Hence, as a grown-up individual, you definitely need to invest regularly and wisely to meet your financial goals. Everyone should follow discipline in their investments just as Armed forces officers follow certain rules and regulations in their everyday routine.

When it comes to investing, discipline means taking the steps that will move you closer to your objectives. In a volatile market, one should maintain control of their actions and avoid being swayed by the short-term ups and downs of the market.

For example, many people start their SIPs for 20 years with the intention of building wealth, but after seeing negative portfolio returns over a period of a few months or a couple of years, they quit their SIPs that was intended to be for 20 years. In this case, when the equity markets remain volatile and follow a bear trend, then you should not look at your portfolio and let the SIP go in a disciplined manner according to your risk profile. You should even infuse some more amount into your portfolio because a bear trend in the short term gives you golden days of investment opportunity in the equity market.

Investment discipline means you have a strategy to meet your goals, minimize risk and minimize the costs. Don’t be tempted to make emotional decisions then.

(Contributed by Shaheen Akhtar Associate Financial Planner, Team Prithvi)

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