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Thanks @sagarpadaki. The freefincal article is basically saying "over long term" it is better to invest the lumpsum as quickly as possible into the equity market.
I do agree with this.

I will most likely split it up into 10 equal parts and deploy it over 10 weeks. So in 2.5 months the entire amount is invested.

I would like to invest some money in a small cap fund. Any suggestions on which MF is good in this category? My time horizon is 10 years. Mode would be lump sum.

Are you really sure that you want to invest in Small Cap mutual funds?

And if so, are you sure you want to invest right now, when the valuations are deemed by industry experts to be high?

Adding some reading on that -
https://freefincal.com/which-small-c...-my-portfolio/. Please also do consult your financial advisor.

If after all this, you still want to go for an active Small Cap mutual fund, I'd probably unwillingly suggest ICICI Prudential Small Cap Direct fund. Lesser AUM than the bloated Nippon Small Cap fund but has a decent track record (not that it will guarantee similar returns in the future).

Need help!

I would like to invest small amount monthly for 2 kids (boy 13 years - currently in 8th grade and a girl 8 years - currently in 3rd grade). Aim is to help them for their higher education when they turn 18. What is the best instrument to invest to make sure that fund is used for their education? Can I invest in their name, or should I invest in my name and keep them as nominees?

Hello,

Your son is 13, so ~5years for him to turn 18; I would suggest to pick large cap funds as the duration is not too long. You can take an exposure of ~20% in midcaps at max. For your daughter, you can take some exposure in smallcap as the investment will be for a longer horizon. A mix of 60% in large and mid and 40% in small cap funds should be good. Don't invest in their name. It only adds to complications with no real benefit- except some passing of tax liability if you sell the investments after they turn 18. For sure, keep nominees in all folios.

Regards.

You can think of Sukanya Samriddhi scheme for your daughter, you can open one before she crosses 10 years of age. It can be redeemed once she turns 18 for higher studies.

Disclaimer: Purely my personal opinion, not to be taken as advice. Please do consult a properly qualified financial advisor.

I personally do not believe in equity for goals that are both short-term and time-bound. If I were in your situation, this is what I'd probably invest in, in order of priority:

• Fixed Deposits: Nothing beats the peace of mind that this time-honoured investment avenue will give me. I think most banks allow me to open the FD in a minor child's name (might require opening a savings account in their name though). If I go for the too-big-to-fail banks like SBI, HDFC, ICICI, Axis etc, I can set aside a proper amount for their education. If I want to invest periodically, I can make it a laddered combination of Fixed and Recurring Deposits.
• Debt Funds: Riskier than FDs. But not nearly as much as Equity. I'd probably opt for Money Market (kind of stable) or Gilt (a bit more volatile) funds in my own name. I'd stay away from other riskier Debt funds.

If given a choice to opt for both, I'd choose to put a major portion of it in FDs/RDs, and the remainder in Money Market/Gilt funds.

Note: I know there would be recommendations for equity from other members, but you need to decide for yourself whether you want the higher returns or the protection of your capital for a short period like 5 years. A well-placed market crash can totally wipe you out a few months before your children reach 18 years of age. And you wouldn't have time for the market to recover from it, as you mandatorily need the cash at that stage. I have seen this happen in 2020 for a friend of mine, it's not just fear-mongering.
This is why I suggested consulting a financial advisor who can help you understand what you exactly want to achieve via investing.

Can pick a muti-cap fund (1 or 2 based on your preference) and start an SIP in it with no end date. Withdraw when you need funds but continue the SIP until all of your goals are met. 2 funds may help in diversifying the fund house/fund manager but otherwise 1 fund can work too. Multi-cap will help in keep the portfolio balanced regardless of the economic cycle.

While @SmallBot's advice seems counter-intuitive especially on a thread discussing mutual fund investments, there is value in the statement on using equity for short-term / time-bound goals.

I would say that 5 years is definitely short-term for equity but equity can be considered for 10 year investments. The education goal themselves being time-bound (withdrawal at/around 18 years) adds another dimension of dealing with returns risk from investment closer to goal date. As @SmallBot has highlighted volatility / risk increases from FDs->Debt funds->Equity funds. A few years of equity market lows at redemption will be unhelpful.

For your son, best is to stick with Bank FDs/RDs given that there are only 5 years available for investment to be redeemed. For your daughter, if you must have MF investments, then a combination of money-market debt funds and index/large-cap funds is what I would suggest.

There is no one "best" instrument for financial planning. Everything is relative to an individual's current situation and what they are trying to accomplish.

This is where a qualified professional adds value by tailoring recommendations specific to your needs. Given the criticality of investments for children's education goal, please do consider getting paid advice. All the best!

Thanks saket77, joyee, Small Bot, sunilch, and vijaykr:thumbs up

Based on your suggestions, I am thinking of following

Boy (13 years) - FD lumpsum and monthly RD/debt fund SIP (will also check SIP in an Nifty50 index fund)
Girl (8 years) - Sukanya Samriddhi + Equity mutual fund SIP (Nifty50 index or Multi cap or Multi Asset fund)

Please let me know if these are ok.

Kids are my nephew and niece, that is the reason for my nominee related question. Should I still invest in my name, keeping them as nominees?

Please check on the tax implications and decide if you want to invest in your name or directly in the name of the kids. My understanding, you could gift the investment amounts periodically (and this is lay man advice) for it to be more tax efficient.

For the Boy (5 year horizon)
If you are going with lumpsum FD+SIP for equity, do consider investing in govt/govt guaranteed bonds
Ex: https://www.thefixedincome.com/produ...ited-30nov2028 matures in about 5 years with a yield of ~9%.
You could consider to put the interest payouts in the SIP. Note that this would need a demat account, but the yeilds are much higher than any bank. On the risk side, these are not profitable companies, but are underwritten by the state govts, so risk of default is rather low.

For the Girl (7 year horizon)
Please do recheck if the Sukanya samruddhi is in alignment with your aim of funding education
a) you can invest a max of 1.5 lakh per year.
b) The maturity is AFTER 21 years of opening the account (not linked to the age of the child). In your case the kid is 8 years old, this will mean that the maturity proceeds will reach the kid on attaining 29 years. Contributions are allowed for the first 15years (i.e till the kid reaches 23 year). On reaching 18 years of age, you can withdraw 50% of the accumulated balance of the previous year (i.e max amount -> 9years*1.5L = 13.L+interest )

PS: Personally I would stay way from equity exposure for funding the boy since the duration is just 5 years away.

I am assuming you have a target figure in mind.
In equity you can either have a time target or a price target to exit.
In your case you have both which does not work simply because, when the time comes to exit the value will depend upon what the market is doing.
So you should be willing to sell your investment if the desired target is achieved much before or at the time of selling you should accept the return you are getting and have backup plans to fill any gap if need be.
This is if you decide to use equity/MF as the means to achieve your goals here.
*

I would like to invest money in a Nifty 50 Index fund and midcap fund . Any suggestions on which MF is good in this category? My time horizon is 5 years. Mode would be SIP.

Please let me know..

Thanks

Fund selection is a personal choice, and one should put some effort in identifying the suitable fund. Fund category can be suggested, but a particular fund within a category should be a personal decision. Reason being, if the suggested fund starts underperforming, one will feel they received a hard end of the stick/advice. This is like asking which color car to choose.

Hi @dsnaveen. The last response was based on your query without any target goals/dates. I assumed it was for your retirement or general wealth creation/building. And hence the response. Classic GIGO.

For your specific need of 5 year goal, I wouldnt recommend equity at all. Especially if it is a hard set goal like kids education.
You should look at alternatives like Debt funds.

If you are still sure of a equity MF, then go for balanced fund or worst case Nifty 50 index fund.