Planning to open PPF in Minor daughter name – Any suggestions ?

POSTED BY jinesh shah ON January 24, 2014 7:39 pm COMMENTS (12)

Hi  I have following

Assumption – Investment in PPF not for tax

1) PPF in my name in which I invest < 100000 am planning to open a minor PPF account in name of my daughter. (again not for tax benefits). It seems better form of investment. at current levels as its in to EEE bracket.

Any views or other observations on the same!!!!

12 replies on this article “Planning to open PPF in Minor daughter name – Any suggestions ?”

  1. ashalanshu says:

    Dear Jinesh, please open the account for your inor d’ter under the guardianship of your wife. if you open the account under your own guardianship, you can not invest more than 1L Rs. combinedly in these 2 accounts (your and your d’ter’s).

    Thanks

    Ashal

  2. jinesh shah says:

    Thanks Ashal
    appreciate ur concern.
    What about if theres tax on MFs also, What if when u want to redeem MFs are at their lowest NAVs

    What if u r at negative returns when u want to redeem ur money.
    What am simply asking dear is that is there any benefit if I invest in Minors name (without considering any tax benefit).

    1. Sumit says:

      Jinesh – Just trying to answer your query about –

      “What if u r at negative returns when u want to redeem ur money.” —

      Other than it’s a blunder like 2008, after such a long year 10-15 years money averaging (through systematic investment) the possibilities of negative returns become very low…and that’d why every one suggests to be systematic (not in lump sum) for long term.

      And if that does not look ideal, then there are still other ways:-

      1) Periodic re-balancing and booking the profit from equity based funds to debt funds, or in Fixed income product, to save the profit you already gained.
      2) And Suppose for a 10 year goals, after it completes 7 years, look at it as a 3 year goal portfolio, and Systematically Withdraw your money from Equity and invest in debt/Fixed Income products.
      Equity is business, and business is bound to grow, India has huge potential, that why multinationals invests in India. 20 years down the line, we will feel lot poorer than others if we ignore equity.

      Thanks
      Sumit

      1. rahul123 says:

        Dear Sumit,

        1. If i invest the money in equity, it should be available at the time of my requirement and need. One should not plan/prioritize based on the markets performance.

        2.
        a)Many of the portfolio managers, struggles to beat the benchmark.
        b)Timing the market is almost impossible (even for veteran market participant)
        c) Portfolio re-balancing is very difficult and it also doesn’t give guarantee of success.

        Retail investors are not adept in all these, also consider the loss due to management fee.

        One should invest in stock market, when they are ready to loose all the invested amount. Being said so, don’t reply on stock market return to achieve your goal. Market may disappoint you.

        Thanks,
        Rahul

    2. rahul123 says:

      Jinesh Bhai,

      Your concern is very valid.

      When you get negative returns the market supporter will say think for long term…one can not remain invested forever (idea long term) to get the benefits of investment.

      PPF is the best investment. After exhausting the limit (1,00,000 ), you can think of equity (but again don’t be greedy- limit your exposure to equity).

      Thanks,
      Rahul

  3. jinesh shah says:

    Dear Sumit- Agree with you. I am in for Market linked instruments. But irony in India is that government doesnt want to grow MF industry at all. I am associated with the Asset mgmt industry. It is asset management but have limited reach as they are restricted
    1- no intermediary commission ( which is i guess a prerequisite in India to build AUM- look at LIC
    2- documentation – u can walk in with 5 lac cash and buy gold but for MF u need bank a/c, KYC, PAN etc.
    3- no common intermediary laws. LIC pays ransom to their agents, even NPS pays a lil.
    4- why cant NPS other small insurance cos cant outsource fund management to AMCs, why they need different regulators.

    MF industry is degrowing since some time and only growing is their liquid funds.

    So I guess need to derisk and invest in balanced way as MFs have been fair weather friends. (when u need money markets are mostly down )

  4. ashalanshu says:

    Dear Jinesh, what ‘ll be your planning if it becomes E- E- T after few years?

    Thanks

    Ashal

  5. Sumit says:

    If you are a conservative investors, and do not want any market linked product, then PPF is the best long term fixed Income product with all the benefits.

    But if your goal is long term, 10 years away, then you can think about investing in mutual funds (there are less risky mutual funds like balance funds, if you are not comfortable with more equity exposure). Equity is the best option to create wealth in long term, which can beat any fixed income products, and inflation comfortably in longer run.

    Thanks
    Sumit

    1. rahul123 says:

      Hi Sumit,

      I don’t agree with you about following statement-

      “Equity is the best option to create wealth in long term, which can beat any fixed income products, and inflation comfortably in longer run.”

      This is a wrong perception.

      Please don’t tell me to see last 10/20 years return for nifty….If you have convincing theory then reply else please ignore this.

      Thanks,
      Rahul

      1. Sumit says:

        Again Rahul, I can’t argue every time.
        I have only data to show, real life data, No theory, only practical true real life data. And not only for 1 time frame, any possible time frame could be — you choose any, but the result is as I have said “beat any fixed income products, and inflation comfortably in longer run.”” …. Now if you ignore that and want to put your assumption and theory rather than my practical real life true data, then I don’t have anything to say.

        1. rahul123 says:

          Justifying anything based on number is always risky! Statistics hide more than what they reveal….

          Read Jinesh’s comment below –

          “What if u r at negative returns when u want to redeem ur money.”

          This is the general concern and hence equity /MF is not a best product and i assume it doesn’t always beat fixed income returns.

          Thanks,
          Rahul

          1. Sumit says:

            “What if u r at negative returns when u want to redeem ur money.” —

            Other than it’s a blunder like 2008, after such a long year 10-15 years money averaging (through systematic investment) the possibilities of negative returns become very low…that why we say to be systematic (not in lump sum) for long term.

            OK, And if that does not look ideal, then there are still other ways:-
            1) Peroidic re-balancing and booking the profit from equity based funds to debt funds, or in Fixed income product, to save the profit you already gained.
            2) And Suppose for a 10 year goals, after it completes 7 years, look at it as a 3 year goal portfolio, and Systematically Withdraw your money from Equity and invest in debt/Fixed Income products.

            There are are lot of other ways Friend, but we should not just close our mind, and always think about what if, what that, then what…etc..,
            20 years down the line, we will feel lot poorer than others if we ignore equity.

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