Gift Your Child Financial Freedom!

Actual Question:

Hello Anand. I agree that mutual funds cannot be looked at for short term. But is it practical to set a term horizon for 30–50 years? Most of us young professionals in late twenties/early thirties would be 60–80 years old by that time. So is mutual fund only applicable for retirement planning or can we realise goals in 10–15 years?

Answer:

Dear Friend!

Good results will certainly be produced in 10–15 years. There is no doubt about it. But the spectacular compounding benefits will only be produced after 30 years. Please read the article Miracle of Compounding to understand why it is so. 

Therefore, the best takeaway from this discussion is a parent can invest for the children a lump sum of say Rs.1,00,000/- at the time of birth and by the time the child grows-up to about 35 years the corpus will be so huge that the child (now a grown-up) is financially free. 

Can there be any better gift a parent can give?

Thank you,

With Best Regards

Anand

Is Thematic Investment Good?

Actual Question:

Will thematic investing work In India? Is there a company or a website who helps you invest thematically in India?

Answer:

Dear Friend!

Thank you very much for raising a provoking question. The debate will not only benefit you but a great number of others.

Thematic investment and many other such fashionable names are self-aggrandising innovations of fund mangers to further their personal prospects, actively supported and propagated by funds to somehow attract investors.

Picture shows an investor puzzled by various investment themes peddled by mutual funds

Warren Buffett does not engage in any theme based investment activity. He simply invests in companies that have a sustainable business model, growth, and profits; when such investment opportunities come at a reasonable price. As simple as that.

Every investor can generate significant wealth simply by either investing a single, one time investment of Rs.1,00,000/- or by systematically investing, with strict discipline, without fail, a sum of Rs.5000 to 20000, in a low cost index fund or an exchange traded fund, for a period of 30–35 years.

My dear friend please realise that time generates the spectacular wealth and not human intelligence.

Related topics:

• Miracle of Compounding
• What is an Exchange Traded Fund?
• How to Choose the Right Mutual Fund to Invest?

 Thank you,

With Best Regards

Anand