Mutual Fund Investment Plan for Child Marriage
When planning for a child’s marriage, one often tends to underestimate the amount required. It is said, “marriages are made in heaven but celebrated on Earth.” It is the celebration of the formation of a new bond between two individuals and two families. Most parents wish to celebrate it lavishly, but it is equally important that one plans systematically towards such goals.
This ensures that the grand celebrations don’t need to be downsized for financial constraints. To achieve the desired corpus and have a well-laid financial plan for such goals, it is vital to stay realistic about the goal.
Here are a few critical steps in planning for mutual fund investments for child's marriage:
Quantifying the Goal
The investment journey starts with one small step – quantifying all the financial goals to be achieved and their respective timelines. While planning for a child’s marriage, one should consider all the contingent expenses within such amount to avoid falling short of funds later.
Additionally, one should also have a budget for the customary gifts/ rituals, which are an integral part of Indian weddings. When planning well ahead of time, it is easier to consider all such expenses and still plan within the existing means. This is because starting early gives the advantage to reap the compounding benefits.
Choosing the right mutual fund scheme
Once the financial goal has been determined, one should plan the roadmap to achieve it. So, while the destination for the investment journey is ready, it is time to prepare for the vehicle to help undertake the investment journey. One of the suitable investment options for such goals is investing in Children’s Funds, specifically towards child goals.
As per the SEBI guidelines, such schemes are specific solution-oriented mutual fund schemes with a lock-in period of 5 years. However, if the child turns 18 years before the expiry of 5 years from investment, the lock-in period ends on the same day. The presence of a lock-in period helps the parents to resist their redemption temptation at an early stage.
Consistent Investments through SIP
SIP is a process for a disciplined investment of a certain on a pre-decided date in a specific mutual fund scheme, regularly over a period of time. A Systematic Investment Plan (SIP) may be registered to make regular investments to achieve financial goals in a time-bound manner. SIP helps eliminate the timing bias from the investing journey and focus on the ultimate financial goals.
Post-registration of SIP with mutual fund house, the investment amount is deducted from the bank account periodically and invested in mutual funds on specified dates. The investments continue to be made across market movements, thereby also averaging the cost of investments over time.
Reviewing the goal and investment performance periodically
After setting a goal, one must review the performance against such goals periodically. Equally important is to review the goal itself, for the assumptions made while setting the financial goal may have changed.
Similarly, inflation expectations may have changed over time. One should suitably adjust the financial goals as per the changed circumstances. Further, the performance must be reviewed periodically to identify underperforming schemes. This enables investors to replace such schemes with better-performing ones.
Effective planning towards a child’s marriage can help you to celebrate the most significant occasion of your child’s life without any financial constraints.