[deathwalkr]

Originally Posted by AMG Power

This famous quote from the Dubai sheikh has many parallels in real life - some of which I know:

Not his words?
https://www.aap.com.au/factcheck/dub...h-viral-quote/

[anjan_c2007]

Nothing compares to the Public Provident Fund that is now 55 years old. One can deposit amounts ranging from the minimum upto Rs 150,000=00 per financial year depending on the investor's choice.

Apart from the PPF, most of us have amounts invested in equities and mutual funds. As regards equities, its better to go for the large cap ones bought during a market crash. About mutual funds, we are well aware of the non-performing, mediocre, a wee bit above mediocre, ill- managed, falling, crashing and also on the other hand well performing, rising, well managed, high yielding and superb ones amongst them. Also other than debt funds the small, midcap and large cap funds that are stock market linked need to be avoided during bull runs.

Hence, only after PPF upper limit of Rs 1.5 L is crossed, we can think of investing in shares and mutual funds for our kids. And these share market investments need to be made only in reputed companies, with an excellent track record. We need to appreciate the fact that our kids may require these funds after they attain adulthood. Hence, our vision needs to be focused for the future and towards the health of these investments then.

[Mystic]

The expectations of children changes every generation.My personal story below:

1. My grand father who is from lower middle class has not made any specific investments for education etc to my father who has 11 siblings. In late 1950s, He was told that he has to get his engineering admission on merit / scholarship/ financial support from other adult siblings only. In those days the competition was not great and also IITs were treated as tutorial colleges who print degree certificates in the campus. Universities college of engineering were considered very prestigious. Eventually he completed engineering on merit and scholarship from a University college of engineering and became a chief engineer in Government.

2. Coming to my generation, In early 1980s, we became from low to upper middle class but my father made his position very clear that I need to get admission in a Government engineering college and he will not pay donations for a private engineering college or pay for my abroad college tuition fees even if he can afford it. I did not have courage to argue with him. I completed my engineering from a Government college with a tuition fees of Rs 125 per year which comes to Rs 500 for 4 years of engineering.

3. Coming to my son’s generation. He had his preliminary 10 years of education in USA. Due to personal reasons within family I relocated from Silicon Valley of USA to Silicon Valley of India. All my family folks were happy except my kid. I put him up in 10+2 in a Bangalore school. Initially he complained that he doesn't like Indian education system and wanted to go back to USA for college. I told him to write SAT and also JEE and I will decide on the next steps. He excelled in both with a perfect score in SAT. He got admission into all top 5 colleges both in USA and India. Now the pressure is on me to pay 2 crores of tuition fees for under graduation in Computer science in one of top 5 USA colleges. He being an Indian passport holder, the possibility of a scholarship is very hard to get. He questioned me directly on why I will not sponsor his studies in USA as he has done his job of proving his merit. I sent him to USA on student visa hoping that some miracle happens that he will complete his engineering under graduation within 1 crore which is all the savings I have. Fortunately, he excelled and completed not only his UG but got a PhD in CS-AI-NLP from a top 5 engineering college and became one of the youngest faculty in another top 5 college all within 5 years of his Student visa. By God’s grace, I had done wire transfer of tuition fees from INR to USD only for 2 initial years less than Rs 1C and the rest he helped himself.

Just to summarise the above, my generation was at a receiving end ( my grand father paid not much but my father’s adult siblings helped my father for his engineering. My father paid only Rs 500 for my engineering. I paid Rs 1 crore for my son’s engineering) and most obedient of all generations. We grew up from seeing radios with valves to HD TV and 5G ( This reminds of my days in USA working on a project in Sarnoff Labs formerly called RCA Labs, Radio corporation of America at Princeton. In the conference rooms, there were posters on the walls saying that valves, transistors, chips, black and white TV, color TV, HD TV etc were invented in those rooms). We could not ask our parents money for education and prepared to spend life time savings to our kids.

[Huzi]

We are mostly in different phases of life, age, ability, literacy & financial awareness wise.

If you are someone starting late, assess the delay and do it within your means. No point in sacrificing your today, for adding an extra lakh for kids education/ marriage.

Teach children to stay away from credit cards, debt traps, bad/lazy/irreversible financial decisions.

Children who cultivate learning to take right decisions, know the value of investing, hardwork, investing on their skills, never end up worrying about their inheritance.

Let’s teach them- Learn to earn, learn to learn. Good manners and kindness, goes a long way in life.

[SlowDough]

On the topic of using real estate investment as part of financial planning for children, sharing few arguments I have heard.

1. If you need to withdraw just a part of the entire investment, you cannot, because a house can only be sold as a whole. If your educational requirements turn out to be smaller, then a lot of the profits will be lost to taxation.

2. Any real estate portfolio affordable to a middle class investor offers far less diversification, hence far less predictability, than other investments like FDs or Index funds. It violates the principle of goal based investing.

Further, here's an argument on inflation in education:

Educational expenses may be subject to negative inflation for the next generation. For instance, current graduates (including myself) have spent multitudes of money to first study in a good school, pay for competitive exams while in school, and then pay for two degrees. But at the same time, access to education and training has improved a lot because of technology, to the point that my own industry doesn't value graduation degrees as much anymore. I can imagine positive inflation only for something like medical training which requires a highly specialised community and hospitals, but becoming a well-paid engineer or a product manager doesn't need an expensive, private degree anymore at many companies. Future generations will benefit a lot from capability based hiring rather than grade-based or degree-based hiring, which will result in lesser money spent on frivolous expenses in the name of education.

Note: I am not a parent. Just an investor listening to podcasts and doing my own experiments. This post is to seek counter arguments to add to my own perspectives.

[Axe77]

My take on this. I don’t allocate any specific investments in my child’s name. Unless there is some very specific scheme or benefit like the SSY that Libran mentioned for a girl child, I wouldn’t see any reason to earmark investments in their name. Things like FDs etc I find particularly non remunerative and I frankly don’t have any FDs whatsoever even in my own name. What I do have is PPF - I have invested almost my entire working careers (or a substantial part of it) putting in the max amount allowed per year into PPF (currently its 1.5L p.a.). I find the rate of interest for PPF combined with the power of compounding over a couple of decades can help create a pretty sizeable corpus through this avenue. But other than this I can’t think of any FDs or any substantial debt instruments that I hold. As I grow older of course the debt allocation may change but in the high growth years, I’ve mostly been heavily equity biased to allow the maximum ROI and compounding of my investments.

My approach to the investments was broadly as follows:

- I have listed a certain target corpus that includes my estimation of my requirements as a retired person accounting for cost of living, a back of the envelope unscientific number towards any medical exigencies etc. I have also accounted within that target corpus the cost of educating my child through till his graduation and even some extent of post graduation.

- Personally, I have not included any meaningful money towards wedding expenses or the like. I don’t believe in ostentatious wedding celebrations and however my child chooses to celebrate the occasion, he should do it as per his own financial abilities at the time. I am happy to contribute to that, within reason, to whatever my means are at that time. (I had paid for 90% of my own wedding expenses too - it was a “nice” celebration without any compromise but without going into crazy debt or multiple days long worth of functions). I expect that philosophy to trickle down to him as well.

- Keeping above financial objectives in mind, I save money allocating funds in different classes as I see best for maximizing them from an ROI perspective. I don’t see the need of putting any money specifically in his name.

- Funds are ultimately fungible at the end of the day and the idea is to build a corpus that meets my long term requirements which inherently include my child’s requirements towards basic as well as further education. If the corpus does not end up as planned, it will necessarily influence / limit the kind of money I can allocate towards that further education.

[AMG Power]

Some advice on investing for children for Indian parents:

https://youtube.com/watch?v=T4zvV1Rt...opdVuL4J0fgTWb

and the case study referred to:

https://www.hindustantimes.com/busin...97219-amp.html

[Mystic]

Dying Rich but not living Rich. I personally feel that one should help children at the right time with the best education possible and not bothered about leaving an inheritance after death.

https://businessgoa.in/the-indian-se...t-living-rich/

[am1m]

Originally Posted by Mystic

Dying Rich but not living Rich....leaving an inheritance after death.

Some of the points in the article you shared resonate. I'm essentially the curator of 2 generations of accumulated furniture and crockery. Some of which we haven't even used in over a decade! The grandparents and parents literally hoarded these things, as did my wife's side. And there is literally no one to leave it all to after we both go. I think much before that, we'll be moving to a much smaller town and house/flat that we can manage easily when we retire, and so will have to get rid of it all in a decade or so.

Of course, we should be very grateful to the previous generations for their effort and realize how privileged our generation is. But times are changing, families are getting smaller and perhaps it's time to rethink just how much stuff we need to retain and if it will be of use to the next generation.

[Mystic]

Originally Posted by am1m

perhaps it's time to rethink .

I personally feel that I am lost between older generation and the younger generation. Both my philosopher grand father UG who studied natural mind and my professor son who studied artificial mind seem to be having clarity about their lives and what needs to be done for the next generation.

I remember seeing this interview live in TV with UG and always wondered if this is all and there is nothing more to life especially in the context of this thread of children, investment, our duty as parents etc.

Are we just repeating what our ancestors have been doing for generations wrt children and there is nothing more to do?

https://youtu.be/NlrJqKYs2Ms?feature=shared

[Entsurgeon]

My take- Ultra long term allows you to go for stronger, less riskier, less rewarding but more consistent, more stable avenues. This will eventually give you higher returns. Heres my advise based on my own experience and return.
1 real estate-
A residential plot or 2 in far flung location. Totally legal and financeable from a nationalised bank.
People from tier 1 city might not relate but most tier 2 and lower city people should do this. You should buy a residential plot thats far flung because you dont need to use it immediately. By the time your kid hits 20s he ll have a property at a prime location of city. Guarenteed. Best thing- far flung location would be very cheap. And long term will even out any sudden booms. Expect at least 2 to 3 boom periods in 2 decades. Do not buy constructed house or flat. It has to be residential or maybe commercial plot. Remember, for a far flung estate that you need not use today, you can go for something costing 10-25% of an outright liveable one. Financing the same means barely 2% outlay of a ready to live house. You can even do this as your first investment as if it booms too soon, you can encash, buy next one even farther and fund your own self acquired property from proceeds. Should the need be, you can always get a LAP or use it as a mortgage for higher education abroad.
2. Index fund-
90% funds unserperform a benchmark index over long term. Dont bother choosing funds when chance of her beating the index are 10% or less. Create a SIP. Start early. As time passes, you can continue, increase or decrease your outlay as per needs. I havent touched the same when my kid went to college last year. His hefty fees is something I can pay out of my monthly earnings simply because I started early and hence most of my other investments are finished with their EMIs now. But should the need be, you can always withdraw partially.
3. Gold-
Forget guru gyan. When i was doing my MS 22 years back, my monthly stipend was around 20 gms or 2 tolas of gold. Today, similar position is paid 60 70k a month and thats barely 11gms of gold a month. My 2004 maruti zen cost around 80 tolas of gold then. Today i can get a slightly used c/3/A4 for same. A flat bpughr for arpun 125 tola worth of gold is today 20% cheaper despite the area shown a phenomenal growth.
Gold will indeed beat many of your stock and mutual fund picks. Also remember, most of the Indians havent still bought all the gold they ever wish to. This class will keep on driving demand as they proper.
Tl;dr Should be one of the investments in your folio.
I agree theres not much point in saving for children. However investing with that aim helps you with setting your investment horizon far far longer and hence offering you much better results.

[fhdowntheline]

Originally Posted by Entsurgeon

My take- Ultra long term allows you to go for stronger, less riskier, less rewarding but more consistent, more stable avenues. This will eventually give you higher returns. Heres my advise based on my own experience and return.
1 real estate-
A residential plot or 2 in far flung location. Totally legal and financeable from a nationalised bank.

2. Index fund-

3. Gold-
Forget guru gyan. When i was doing my MS 22 years back, my monthly stipend was around 20 gms or 2 tolas of gold. Today, similar position is paid 60 70k a month and thats barely 11gms of gold a month. My 2004 maruti zen cost around 80 tolas of gold then. Today i can get a slightly used c/3/A4 for same. A flat bpughr for arpun 125 tola worth of gold is today 20% cheaper despite the area shown a phenomenal growth.
Gold will indeed beat many of your stock and mutual fund picks. Also remember, most of the Indians havent still bought all the gold they ever wish to. This class will keep on driving demand as they proper.
Tl;dr Should be one of the investments in your folio.

A few thoughts: 1) investing in land plot in a far flung place may have its own risks in terms of long term security of that asset, unless you have people actively managing/monitoring the plot in that area. Land records in India are quite suspect and politico-real-estate mafia is ever on the prowl.
2) While gold as an asset value has always increased over the years, in the last decade or so it has actually slowed down. Looking at the general data online, gold prices increased multiple folds only twice in 10 year periods since 1964. Between 1964-74 the price increased 8.03 times. Between 2004 and 2014 it increased 4.78 times. But in the last decade, it has increased only 2.21 times.
So while it is a safe asset, I am not sure if it is one of the best ones that will generate good returns. I think long term equity like Index funds will be a better option.

[Entsurgeon]

Originally Posted by fhdowntheline

A few thoughts: 1) investing in land plot in a far flung place may have its own risks in terms of long term security of that asset
2) While gold as an asset
So while it is a safe asset, I am not sure if it is one of the best ones that will generate good returns. I think long term equity like Index funds will be a better option.

Thanks for raising that point.
1. Agreed. I didnt include caveats in my post to prevent it from being lengthy. Hassles in long term are common with estates that had less than perfect paperwork. ( Some builders/ colonisers actually sell such stuff at lower rate to finance rest of their project). I suggest buying something thats financed by a nationalised bank preferably SBI. That takes care of its legal safety. Further, buy in a modern gated township. I also suggest buying in place where you or your relatives can keep visiting and if possible buying in your hometown. If you expect not to relocate, you can buy in city you reside and work in.
2. Gold- Reset that returns calculation for 20 year periods and see the results.
Remember, its never like one particular asset class will always yield better results than everything else. Even gold lost its sheen fir nearly 6 7 years a decade and half ago. The idea is to stay invested in multiple classes and keep rebalcing. Preferably by adding more from savings in the asset which gets undervalued relatively. Do not dismiss any of the big 3 classes- stocks and MF, gold and RE.

[fhdowntheline]

Originally Posted by Entsurgeon

2. Gold- Reset that returns calculation for 20 year periods and see the results.
Remember, its never like one particular asset class will always yield better results than everything else. Even gold lost its sheen fir nearly 6 7 years a decade and half ago. The idea is to stay invested in multiple classes and keep rebalcing. Preferably by adding more from savings in the asset which gets undervalued relatively. Do not dismiss any of the big 3 classes- stocks and MF, gold and RE.

The bold point is important. I also thought about the 20 year period before posting, but usually 10 years is about the right time when one reviews and rebalances the portfolio in anticipation of important milestones. Here, other equity based asset classes have better chance of decent appreciation. But I think we broadly agree more than disagree.

[facelyft]

MID-LIFE-DILEMMA (MLD)

Beyond my family and friends, this is the only forum I browse for a unbiased, non-marketing advice; from pets to cars, heart attacks to foreign settlement; this forum has helped me in so many ways.

I need advice to tackle mid-life-dilemma.
Bit of a background.
Family: I am almost 40. Structural Engineer in MNC; Oil & Gas domain. Spouse runs an interior design and an event management company. Kids: 8 Y/O and a 2 Y/O. Two Dependent Parents.
Monthly Income: 2 L Salary (Self) + 15 L per annum from Spouse
Assets: Living in own house, Used BMW X3, 2 million in Stocks (Unlisted and Equity), Owns a house in my hometown, invested in in a plot in the suburbs and 2 flats which will be ready to handover in the next 2 years. Miscellaneous assets: 10 L or so.
Liabilities: About 25 L home loan.

Now, after listing down all the assets and their appreciation till date versus the predicted appreciation based on the historical trend, we have decided to sell our house. Details below.

Subject Property data: It is a 3000 SFT, G+2 independent house in a gated community. We bought it in 2016/17 for 75 L and now the current market price is around 3 CR. We have estimated that the current property may not appreciate another 100% in the coming 4 or 5 years.

On the other hand, we are losing heavily by sitting on a property which is worth 3 CR not appreciating at the same as it did in the past 2 years; and only saving us a rental out-go of 40K per month.

The Plan: Considering the appreciation aspect, we are planning to sell this property to invest in the following domains which would yield us a better Return on Investment.

1. Stocks: We have some reliable guidance with in our network. A percentage of money we are going to get from the sale of house goes into investing in stocks.
2. A commercial property: This would give us a constant flow of income on monthly basis. However, the appreciation of these sort virtual spaces is not great. This is mostly for those monthly incomes.
3. Residential Flats: Again we have some very good network to invest in residential flats by which we can earn 100% appreciation in 3 or years or so. This is a hybrid plan for both long-term appreciation and regular monthly income source.
4. Plots: This is long term investment plan.
5. Unknown territory: We wouldn't mind venturing into random unknown territories. 10% of investment goes into this. Any suggestions are wlecome.

Other Notes:
We are used to selling, purchasing and flipping cycle. We did this 3 times in the last 10 years or so. However, this one slightly different. Because during all those transitions, we moved from one owned property to another. This time we need to shift to a rental property, may be temporarily or I may choose to remain in rental property forever. Please read on.

We calculated the rental out-go versus the income from the profit after sale. They all seem mathematically profitable / biased towards a rental model.

I am also thinking about NOT staying in another own house ever again. One, considering the domains which can appreciate faster; two, if I don't like something, or if I have to move to a different place considering a young family, I can just check-out and check-in a lot more easily.

My thinking is, if we establish a robust multi-source income plan, I can afford a rental property of 50K without much pinching.

I understand that there are way too many different variables; factors from political to micro and macro economical situations, inflation, job markets, attrition rates etc. to arrive at estimated appreciation and returns on investments etc.. However, I would not mind raw advices or directions. This is my first step towards the next turn.

Questions: Am I on the right path? Or is it completely insane? Are there any professional organizations or financial advisers who can guide me? I would love to have advices from TBHP forum. As I said, this forum has a unique bunch of different people with domain knowledge, common sense and out-of-the box thinkers too. Please help.