Newborn's Investment Planning | Health Insurance advice

Sumi said:

Hey everyone, got two queries for people who know better since I do have MFs but more of a SiP and forget about it person.

I have a son who's 3 months old right now and want to start a SiP or anything related like educational insurance. What would you guys suggest. I'm targeting a monthly of 2k right now as expenses are at an all-time high. Will definitely increase the said amount some months after so take that in note.

Basically, want to start investing so when he pursues higher education/business, he'll have more freedom to decide on what he wants to do

Other question is what medical insurance would be great to have, any recommendations for the family of three? (My wife, son and me)

Could I get an overall expenditure per month that would incur for this so that I can plan this out with the family.

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Put 1.5L per year in PPF for him. Its the only safe investment with near Mutual fund returns.

Medical insurance - Base policy 10L floating + 90L floating Super topup or individual ones. Can HDFC, ICICI or others of your choice. Never get anything LIC.

Party Monger said:

Put 1.5L per year in PPF for him. Its the only safe investment with near Mutual fund returns.

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nope, not even close, current rate for ppf is 7.1% and any decent index fund will easily net you atleast 10% (and this is bare minimum) and will be closer to 15% conservatively, also GST is charged on the interest earned on top interest in ppf now which reduces earnings further, PPF is a decent debt instrument and thats it

altair21 said:

nope, not even close, current rate for ppf is 7.1% and any decent index fund will easily net you atleast 10% (and this is bare minimum) and will be closer to 15% conservatively, also GST is charged on the interest earned on top interest in ppf now which reduces earnings further, PPF is a decent debt instrument and thats it

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There is no gst on PPF interest. and PPF gives post tax returns of nearly 10-11 if youre in 30% bracket.

Party Monger said:

There is no gst on PPF interest. and PPF gives post tax returns of nearly 10-11 if youre in 30% bracket.

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there is, it's not on interest, it's on interest earned on the interest of your investment

altair21 said:

there is, it's not on interest, it's on interest earned on the interest of your investment

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Bro there is no GST on any interest much less PPF interest. What are you smoking?

Party Monger said:

Bro there is no GST on any interest much less PPF interest. What are you smoking?

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yeah my bad, I opened the article I read before, I read it wrong

altair21 said:

nope, not even close, current rate for ppf is 7.1% and any decent index fund will easily net you atleast 10% (and this is bare minimum) and will be closer to 15% conservatively, also GST is charged on the interest earned on top interest in ppf now which reduces earnings further, PPF is a decent debt instrument and thats it

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2021 budget changed rules related to PF interest --> As per a proposal in the union budget, income tax will be levied on the interest earned by an individual on his/her contribution in excess of Rs 2.5 lakh in a financial year to a Provident Fund
from-> https://www.icicibank.com/blogs/investment/ppf-budget
you might be confused this with GST
PPF has max contribution of 1.5L per year, so, above rule becomes moot point, but , if OP is employed and has EPF, then, this has to be checked

for OP,
1. take term insurance for you, and if your wife is also employed, take one for her too
2. take personal health insurance floater policy for your family of 3 as @Party Monger suggested, don't just depend on your employer's. If you have one from your employer, it will be added benefit and add your parents to it as beneficiaries
3. mutual fund beats PPF , you have lots of online calculators, check for yourself, I gave few below -


SIP in mutual fund -->


PF withdrawal has specific rules , if its for education or medical emergency, then, no issues, but , if you have some other need, you cannot withdraw, but this is the beauty of PPF, that it makes you disciplined and not let take out money for trivial reasons and make the compounding do its job for 15 f'in years
link --> https://groww.in/p/savings-schemes/ppf-withdrawal

frozenscotch said:

2021 budget changed rules related to PF interest --> As per a proposal in the union budget, income tax will be levied on the interest earned by an individual on his/her contribution in excess of Rs 2.5 lakh in a financial year to a Provident Fund
from-> https://www.icicibank.com/blogs/investment/ppf-budget
you might be confused this with GST
PPF has max contribution of 1.5L per year, so, above rule becomes moot point, but , if OP is employed and has EPF, then, this has to be checked

for OP,
1. take term insurance for you, and if your wife is also employed, take one for her too
2. take personal health insurance floater policy for your family of 3 as @Party Monger suggested, don't just depend on your employer's. If you have one from your employer, it will be added benefit and add your parents to it as beneficiaries
3. mutual fund beats PPF , you have lots of online calculators, check for yourself, I gave few below -

PPF Calculator - Public Provident Fund Calculator Online

PPF Calculator - To Calculate Public Provident Fund Online like returns, maturity and withdrawal of your PPF investment. To know more about PPF Benefits and how to invest in direct mutual funds for free at Groww.in.

groww.in

SIP Calculator - Systematic Investment Plan Calculator Online

SIP Calculator - Systematic Investment Plan calculator is a tool that helps you determine the returns you can avail when parking your funds in such investment tools.

groww.in

SIP in mutual fund -->


PF withdrawal has specific rules , if its for education or medical emergency, then, no issues, but , if you have some other need, you cannot withdraw, but this is the beauty of PPF, that it makes you disciplined and not let take out money for trivial reasons and make the compounding do its job for 15 f'in years
link --> https://groww.in/p/savings-schemes/ppf-withdrawal

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Money in PPF is safe. for a little more return you take on a lot more risk. This doesnt include the tax benefit. One you tax the mutual funds returns, they become lesser.

So mutual funds will get taxed at atleast 12.5% and edu cess + surcharge. That will send the returns in 40L. Now if you dont do this linearly, and switch funds, you'll pay a lot more tax.. And depending on when you change, 2-3yrs vs 13-14yr, that will effect compounding too as tax will be paid earlier. Doesnt even take into account crashes etc. IF you need money and its a bear market, all the best. Also it takes time and effort. PPF is pay and forget.

Tax benefits of PPF will make its return higher, since you dont pay tax on its income.

My suggestion is to first fully use PPF limits of parents and kids. Then put spare money in SIP etc.

So priority wise -
1) Term insurance
2) Health insurance
3) CNG Car/ safe independent mode of transport (wait and get best vfm, track new launches) +Car insurance (max period you can get zero dep insurance, sell after that). Not two wheelers.
4) PPF
4) Mutual funds/ Stock market

Why Car? Ask people stranded in other cities due to Covid lockdown.

Party Monger said:

Money in PPF is safe. for a little more return you take on a lot more risk. This doesnt include the tax benefit. One you tax the mutual funds returns, they become lesser.

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money in post office/SBI savings a/c is safest - 3.5%
money in FD with a little risk = ~5.5%
PPF with a little more risk = ~7.1%
NPS with some more risk = no idea
MF with some more risk = 12% and more
direct stocks and FnO etc etc = you get the drift

from HDFC site https://www.hdfcfund.com/product-solutions/overview/hdfc-elss-tax-saver/direct#performance
leaflet-->

this ELSS TAX Saver fund returns are 22.5% if you calculate from its inception year i.e 1996 , (PPF = 7.1%)
both ELSS and PPF are in 80C, so, both give tax benefits

Party Monger said:

So mutual funds will get taxed at atleast 12.5% and edu cess + surcharge. That will send the returns in 40L.

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In my prev reply, I gave 10% nominal rate, but , considering above facts, with 15% ROI, calculations again --

I took off 20% (12.5 + cess + others), still its Rs.67,68,000 (PPF is 40,68,000)

Now if you dont do this linearly, and switch funds, you'll pay a lot more tax.. And depending on when you change, 2-3yrs vs 13-14yr, that will effect compounding too as tax will be paid earlier.

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This is wrong assumption you are making , to pay more tax and reduce final returns.
And if somebody is not doing linearly means, seemingly, he is able to extract more returns

Party Monger said:

Doesnt even take into account crashes etc. IF you need money and its a bear market, all the best. Also it takes time and effort. PPF is pay and forget.

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yes, crashes, in last 20 years, we have couple of recessions, covid, demonetization, financial crisis and banks fell, but still, look at the markets be it US or India.

Party Monger said:

Tax benefits of PPF will make its return higher, since you dont pay tax on its income.

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Wrong , look at my above illustration. You can even check NIFTY50, it still beats PPF

Party Monger said:

IF you need money and its a bear market, all the best. Also it takes time and effort. PPF is pay and forget.

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If you need money, even PPF doesn't allow you to withdraw except in few cases I mentioned in previous reply
You being super conservative and safe, preferring PPF, pay and forget type, not wrong at all.

And yeah, it takes time and effort when the stakes are in tens of lakhs or even crores.
Equities is for long term wealth creation, keep it sipping and simple

We can all fight the risk vs return war, but ultimately it is down to the risk acceptance of the investor and the objectives he is trying to fulfill.
For this specific case, I don't see any issues in doing both PPF and SIP, given that the investment objective is long term. PPF is straightforward while the MF for SIP is the decision to be made.
Given the amount is small to begin with, a SIP is better. PPF can be added later when the investment amount is increased. If the OP is risk averse, swap these choices. The only factor to keep in mind is that we don't know for how long the tax benefit on PPF will remain.

frozenscotch said:

money in post office/SBI savings a/c is safest - 3.5%
money in FD with a little risk = ~5.5%
PPF with a little more risk = ~7.1%
NPS with some more risk = no idea
MF with some more risk = 12% and more
direct stocks and FnO etc etc = you get the drift

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Practically any deposit in govt banks has the same amount of risk. Your post is misleading.

As for Mutual Funds returns, listen to what they say in Mutual fund ads. What they are obligated by law to say, but say it so fast you cant hear it. Past performance is no guarantee for future returns. Currently there is a huge bubble. You can decide for yourself. The guy raking in 20L in mutual fund comissions told me to stay away cause hes never seen current situation in his life and cant see anyway this ends well. You might not even get the principal investment back.

Party Monger said:

Practically any deposit in govt banks has the same amount of risk. Your post is misleading.

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I am showing the risk level, not misleading, you are missing the point here.
As you said, it takes time and effort, and when you put it, you are rewarded.

Party Monger said:

As for Mutual Funds returns, listen to what they say in Mutual fund ads. What they are obligated by law to say, but say it so fast you cant hear it. Past performance is no guarantee for future returns. Currently there is a huge bubble. You can decide for yourself. The guy raking in 20L in mutual fund comissions told me to stay away cause hes never seen current situation in his life and cant see anyway this ends well. You might not even get the principal investment back.

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This happened many times before , everybody shouted bubble, but look at the long term (~20years) .

frozenscotch said:

I am showing the risk level, not misleading, you are missing the point here.
As you said, it takes time and effort, and when you put it, you are rewarded.

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You made that up till PPF. Practically all govt bank deposits are same risk level.
After that its correct cause NPS also invests in mutual funds.

frozenscotch said:

This happened many times before , everybody shouted bubble, but look at the long term (~20years) .

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Yes but back then, this much money wasnt flowing into shares that it caused Banks deposit rates to fall. People are breaking FDs to put into stocks.

Party Monger said:

You made that up till PPF. Practically all govt bank deposits are same risk level.
After that its correct cause NPS also invests in mutual funds.

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money in post office/SBI savings a/c is safest - 3.5% this is also not constant and varies (link)
money in FD with a little risk = ~5.5% --> max of 5L of FD is insured, if its more, and if bank has some issues, there is no guarantee (source)
PPF with a little more risk = ~7.1% --> govt decides it, and it varies (link)
nothing is made up , pls read

Yes but back then, this much money wasnt flowing into shares that it caused Banks deposit rates to fall. People are breaking FDs to put into stocks.

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our bank deposit rates fell coz of US FED rate cut (due to covid in current scenario)

again, you are missing the point and giving reasons not pertaining to current thread

equities give better returns, debt (PPF) gives safety.
depends on one's risk, you can acheive lot better returns than PPF

OP, there's no right answer tbh. It depends on what risk tolerance you have. Based on that you will have to decide on your ratio for debt:equity. As you near the goal you should be in very conservative i.e. fixed income or debt

Party Monger said:

As for Mutual Funds returns, listen to what they say in Mutual fund ads. What they are obligated by law to say, but say it so fast you cant hear it. Past performance is no guarantee for future returns. Currently there is a huge bubble. You can decide for yourself. The guy raking in 20L in mutual fund comissions told me to stay away cause hes never seen current situation in his life and cant see anyway this ends well. You might not even get the principal investment back.

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Where do you think MFs invest in btw especially large cap & index fund? They are mandated by sebi rules/law to invest only in certain top 30/50 companies of India by market worth. Now what kind of situation do you think this country would be in if those 30/50 companies are all sinking, if there ever come such a time then it doesn't matter where you put your money in the country it won't be of any use anyway because of unimaginably high inflation & overall environment. Basically, as long as India doesn't become like Sri Lanka or Bangladesh currently, the MFs (large cap & index fund) return will beat any FD/PPF return & for them to give lesser return then FDs/PPF Indian economy has to become like Sri Lanka/Bangladesh. Do you see the conundrum now?