Junior Wealth - Mutual Fund Investment for Child
Having children is one of life’s greatest blessings. While they bring immense joy to parents, they must plan and secure their children’s future.
Raising a child in metropolitan cities is one of the most expensive undertakings. Schooling alone can cost up to Rs. 30 lakhs, and college expenses can exceed Rs. 1 crore. With such high costs, if parents don’t plan their children’s finances, they are risking their children’s future well-being.
Similar to our Freedom 45 mutual fund portfolio, which aims to achieve financial independence for investors by the age of 45, Floatr has introduced another portfolio called “Junior Wealth.” It helps you build a fund for your children’s financial needs when they enter college, using an aggressive investment strategy for long-term growth.
In this blog, let us dive deep into the benefits of the premier mutual fund basket – “Junior Wealth” designed for securing your children’s future offered by Floatr.
Features of Junior Wealth
Junior wealth, specifically designed for planning your child’s future has the following features:
Preferred Tenure (Above 5 years): Junior Wealth encourages long-term financial planning for your child’s future needs. This extended horizon allows for potential growth and compounding of investments, which can be crucial for achieving significant financial goals such as education or marriage expenses.
Risk Category(moderate): The moderate risk category indicates that Junior Wealth strikes a balance between risk and potential returns. It acknowledges that while you want to grow your child’s wealth, you also want to ensure stability.
Minimum One-Time Investment (INR 25,000): To get started with Junior Wealth, you can make a minimum one-time investment of INR 25,000.
Minimum SIP (INR 2,000): Junior Wealth also offers the flexibility of making regular investments through SIPs, with a minimum monthly contribution of INR 2,000. SIPs allow you to invest smaller amounts at regular intervals, making it easier to build a significant corpus over time without straining your finances.
Lock-In Period (Not Applicable): Unlike other financial products that impose lock-in periods, Junior Wealth does not have such restrictions. You can access your funds whenever you need them without penalties. This flexibility can be beneficial, especially in the event of unforeseen circumstances where you might require the funds for your child’s immediate needs.
Junior wealth comprises the following mutual funds and follows a moderate risk strategy:
HDFC Balanced Advantage Fund – Regular Plan-Growth
This fund offers a balanced approach, combining equity and debt investments to provide stability and growth potential. 25% of your investments are allocated here. This scheme has earned a return of 13.17% over 10 years.
ICICI Prudential Small Cap Fund – Growth
Small-cap stocks have the potential for high growth. 20% of your investments are allocated to this fund and it has earned a return of 18.75% over the past 10 years.
SBI Equity Savings Fund – Regular – Growth
This fund offers a unique blend of equity, arbitrage, and debt investments, providing stability and potential for higher returns. It constitutes 30% of your portfolio, adding diversification and risk management and has earned a return of 8.85% since its inception in 2015.
Nippon India Large Cap Fund Growth
Large-cap stocks provide stability and steady growth. It comprises the remaining 25% of the portfolio and has returned 16.98% returns over 10 years.
5 things to keep in mind to plan your child's future
Planning for your child’s future is a crucial step that can prepare you for various stages of life, including their education, higher education, healthcare, and even their wedding.
To ensure a financially secure future for your child, you can follow these five principles and get started:
Start investing early
Many parents delay saving and investing for their children until they reach primary school age. However, waiting too long may jeopardise your child’s access to quality higher education, which is becoming very expensive. By initiating investments as early as your child’s birth, you position yourself better to invest in moderately risky instruments that offer better long-term returns.
Instead of relying only on low-risk fixed-income securities, explore various investment avenues that can provide higher returns over the long term. Consider beginning with a SIP to benefit from compounding. Remember to periodically review your child’s investment portfolio for potential rebalancing, aligning your strategies with market conditions and your goals.
Align investments with short-term and long-term goals
Categorise your child’s financial goals into short-term and long-term objectives. Short-term goals may include expenses that must be covered within the next 1-2 years, such as school fees and extracurricular activities.
Long-term goals encompass expenses like university admission and fees, overseas education, and your child’s wedding.
For long-term goals, consider equity investments, which offer moderate risk with the potential for good returns. Reserve surplus funds for short-term goals by investing in liquid assets like Fixed Deposits (FDs) or less risky debt funds.
Secure your child’s health and life
Complete financial planning includes safeguarding your children through comprehensive health and life insurance plans. When selecting insurance plans, carefully review the terms and conditions to understand their impact fully.
When purchasing life insurance for your family, go for a premium waiver plan. This type of plan provides financial support to your family in case of any unfortunate circumstances.
Consider partial withdrawal investment plans
Investing in your child’s future from an early stage often involves long-term commitments, ranging from 15 to 20 years. Many instruments that offer both security and good returns come with extended lock-in periods.
Look for investment options that allow for partial withdrawals to fulfil your child’s future needs. Choosing instruments that are flexible during emergencies can prevent regrets down the road.
Appoint a nominee
Appointing a nominee for all the investments you make for your child is a responsible step that should not be overlooked. Neglecting to select a nominee can lead to complications in future. Therefore, carefully consider all possibilities and nominate a reliable family member as the nominee for your child’s investments.
Being an investor goes beyond simply initiating an investment. It involves the ongoing responsibility of regularly reviewing and adapting your goals to align with your aspirations, market dynamics, and your evolving financial requirements.
This is where Floatr steps in to provide a comprehensive solution for managing your finances. It serves as an all-in-one platform for your financial planning needs. Within the app, you’ll find predefined goals like building a rainy day fund and preparing for retirement, making it effortless to strategise and work towards these objectives.
You also have the flexibility to establish personalised financial goals, kickstarting your savings and investment endeavours directly through the app. Floatr also offers tools for budgeting, expense tracking, and convenient bill payments to further streamline your financial management.
In addition to these financial management features, Floatr also provides pre-selected mutual fund portfolios like Junior Wealth, as we covered in this blog. These portfolios are meticulously crafted by industry experts, instilling confidence in Floatr as a reliable steward of your finances.