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COVID-19 and other economic complexities have left inflation and the economy at a place where we have all been forced to re-think the way we look at our financial journeys. Necessities such as education, home loans, etc., are becoming increasingly difficult to maintain or even afford, which is why it helps if parents start financial planning as early as they can. Wise investment decisions today can help your children achieve their dreams and help us collectively build a stronger, more capable India. Let’s take a look now at key investment strategies and themes that can help you save for your child’s bright future.
Be aware of the cost of professional courses and certifications
Whether your child wants to be a doctor, a journalist, an engineer, or an investment manager, professional qualifications are needed. However, in a country like India, with a rapidly growing population of young people, competition for the limited number of seats for professional courses is intense. This means that the cost of education, and supplementary costs like tuition, will likely be more than today. Over the past 5-10 years, costs in the higher education sector have ballooned by double-digit figures. Right now, MBA fees, for instance, can be as high as INR 20-40 lakh for a two-year program. We don’t expect this trend to reverse itself in the near future, meaning that quality education 10 years down the line will be a substantially costlier proposition than it is right now.
When preparing your investment strategy, it’s critical that you have an awareness of the current and projected costs of professional courses and certifications. That way, you will be able to afford a quality higher education experience for your child, when the time comes.
Monitor the medium to long-term inflation rate
High levels of inflation limit the utility of the gains you make from strategic investments. Over the past two decades, inflation rates have fluctuated dramatically, year-on-year, with a high of 12.3 per cent in 2008, and a low of 3.3 per cent last year. What does this entail when it comes to investing in your child’s future? Conventional assets might not generate a sufficient amount of interest to offset the rate of inflation in the long term. This means that you will want to rethink your risk appetite and incorporate a larger proportion of higher-return products into your portfolio. While this does have implications in terms of overall risk, high returns are the only way to combat a sustained, high level of inflation. Low returns from conventional assets could, in the long term, effectively erode the value of your savings.
What does your cash surplus look like?
On a given month, and across a given year, what does your cash surplus look like? Once you’ve accounted for expenses and discretionary spending, how much cash is left for savings and what are the long-term trends you’ve seen with regards to this amount? Having an adequate monthly and yearly cash surplus is critical to your long-term investment plan for your child’s future. You need to evaluate your current cash surplus situation to identify whether or not it aligns with your investment goals. If your plan is to save a certain amount every month, does your cash surplus actually allow you to do so? If not, you’ll want to take a look at your discretionary spending and pare things down to enable a greater, sustained cash surplus on a month-to-month basis.
What investment vehicles are available and how do you allocate your investments?
In these times of change and greater uncertainty, it’s important to be aware of all the potential investment vehicles available, as well as their ups and downsides. You also want to strategically allocate your investment between different vehicles to minimize risk and meet your target in terms of returns. Fixed deposits, bonds, mutual funds and even exotic instruments like crypto all have different plus and make sense in different contexts. For instance, investing a large proportion of your savings towards an FD will ensure stability. However, higher levels of inflation might mean that the actual value of your investment will either stagnate or even come down slightly over time. In general, FD rates of return range between 3.5 per cent and 7 per cent in India. Looking at historical inflation trends, a lower rate of return would cause your savings to erode in value. Other vehicles come with higher levels of return, but are accompanied by increased risk. You’ll need to sit with your financial advisor and draw up a plan that aligns your investments with your target return for enabling your child’s future.
Conclusion: Plan, monitor, and review your investment
Investing towards your child’s future isn’t a ‘fire-and-forget’ decision. You need to carefully plan your investment strategy, monitor its success and periodically iterate and realign to ensure long-term success. You need to take into account changes in the market and overall economy, as well as personal changes—as they grow older, your child’s interests may change, along with their higher education prospects. The best way to plan and follow through on your investment is to work closely with your financial advisor. Set a plan in action, identify long-term goals, then review the state of your investment on a regular basis with your advisor, allowing for changes, both in terms of allocation, and in terms of what you’re putting in each month. Your child’s future matters. Saving to make their dreams come true can be the greatest gift you can give. But in a volatile economy and environment, it’s important to do this strategically.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
