To provide for my daughter’s higher education, I have started two SIPs of Rs 10,000 each in a mid-cap fund and a small-cap fund. I selected the funds by looking at a chart in a popular online mutual fund investment portal. Please guide me on whether I have made the correct decision.
Lalit Kumar
Reply by Rajiv Bajaj, Chairman & MD, Bajaj Capital Ltd.
I want to point out a potential oversight in your approach to financial decisions. Think of it this way: when you’re unwell, turning to the internet for self-diagnosis and treatment isn’t the most prudent choice. Seeking advice from a qualified doctor ensures a more informed and effective path to recovery. Similarly, consulting a certified Financial Planner is crucial when it comes to crucial investment decisions.
In this context, I recommend dividing your Rs 20,000 investment into 5 SIPs of Rs. 4,000 each. Two SIPs should be allocated to selected large-cap funds, the 3rd SIP to a mid-cap fund, the 4th SIP to a multi-cap fund, and the last SIP of Rs 4,000 can be invested in a fund of your choice, such as a small-cap fund, an Index fund, or a value fund.
Additionally, it’s important to calculate the amount required for your daughter’s education in future years, factoring in expected inflation. Once you opt for a qualified advisor, he will guide you on whether a monthly SIP of Rs 20,000 will be sufficient to accumulate the necessary funds for your daughter’s education or if an adjustment is needed.
However, just for better understanding, if you invest Rs 20,000 for 20 years, assuming a rate of return of 12%, you will roughly be able to generate an income of Rs 2 crores.
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)