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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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
