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My daughter is 3 years old now and I am earning Rs 25,000 per month. Can I open a bank account in my name on her behalf (which won't attract taxes) so as to secure her future till she gets married which will include her education? Or can you suggest me any other scheme wherein I can secure her future investing year by year without putting much strain on my salary in future?
—Tejas Lele, Delhi
You can open bank account in your daughter's name but you will have to register yourself as guardian. As far as tax is concerned, you have to pay taxes on the interest. There are many schemes available, especially in mutual funds. It would be good to start systematic investment plan (SIP) in mutual funds to build a good corpus over long term. Mutual funds come in all shape and sizes. There are equity funds which invest in the market and their returns vary with market. The risk is high and hence the returns are also in the range of 12 per cent to 18 per cent. This is what you have mentioned in your question.
There are balanced funds which invests in part equity and part debt which are less risky. Their returns vary from 9 per cent to 14 per cent. Then there are debt funds which invest in government and corporate debt securities which are least risky and their returns are between 7 per cent and 12 per cent.
Here is what I would suggest. You can start with Rs 5,000 per month in mutual funds through SIP way. Invest in three funds; put Rs 1,000 per month in equity fund, Rs 1,500 per month in balanced fund and Rs 2,500 per month in debt funds. You would surely get 11 per cent CAGR which will make this amount about 40 lakhs in 20 years.