Mutual Fund SIP
This is one of the better-yielding options for investment schemes for the girl child in India. Parents who are looking for higher returns and are willing to accept an element of risk can go for Mutual fund SIPs. SIP means systematic investment plan in which parents can invest money at frequent intervals to create a corpus for their daughter. This money is invested by the mutual fund’s company into a combination of the debt and equities market.
SIP is short for Systematic Investment Plan. SIP is nothing but a method of mutual fund investing.There are two main ways to invest in mutual fund schemes – lumpsum and SIP.
Lumpsum investment is when you invest all your available funds at one go into a particular scheme.SIP is when you leave standing instructions with your bank / AMC to automatically invest a predetermined amount of money into a particular mutual fund scheme at predetermined intervals, usually monthly.A SIP investment is one where a certain amount of money is automatically invested into a mutual fund scheme at fixed intervals.
It is best to invest in SIPs as soon as your daughter is born so that the benefits are higher. The Mutual Fund SIPs are usually long-term funds with investment periods of around 10 years. Mutual Funds have several child-specific options, and they invest the money into a well-planned combination of debt and equity. This way, the capital is preserved, and the returns are moderate to high. This investment option can provide annual returns between 10 to 15%. However, Mutual funds do now help you get tax benefits. Also, they are vulnerable to market risks, and therefore, it is best to seek help from a qualified investment advisor and do thorough research before investing.
Lump sum investment
It is a one-time investment you do for one year, like say, Rs. 12,000 annually. If you have a huge disposable amount in hand and have a higher risk tolerance, you may opt for a lumpsum investment.
Same Rs. 12,000 through SIP (Systematic Investment Plan) will translate to putting Rs. 1000 every month. SIP is an ideal choice if you cannot afford a lumpsum investment. Some might also prefer it for its rupee-averaging benefit.