I wish to start investing for my 3-year-old grandson. Please advise suitable funds and also how to go about it. - Ravi Gupta
For his grandson, who will begin college in 15 years, the investment should ideally be in equity and aggressive equity funds. If he isn't comfortable with equity, an aggressive hybrid fund is a suitable alternative. This option will still provide 90 per cent of the potential benefit. Additionally, he should consider investing in one or two mid-cap funds. Over a 15-year period, despite inevitable ups and downs, I'm optimistic that a diversified portfolio held for such a long duration will be the most rewarding.
The only condition is that he must remain invested and ignore all interim dips. Staying invested through market fluctuations is critical for achieving long-term success.
There are two approaches to investing for a grandchild:
- Opening a bank account in the child's name
- Open a bank account in the name of the child, operated by the son.
- Transfer money into this account, and then invest it in the chosen fund(s).
- The investment will remain in the child's name, and when the grandson turns 18, the ownership of the investment will transfer to him. Until then, his father will manage the account and investments on his behalf.
- Investing in his own name
- He can invest the money in his own name but earmark it for his grandson.
- When the grandson turns 18, he can redeem the investment and transfer it to him.
- In case he foresees the possibility of not being around when the time comes, he should nominate his grandson as the beneficiary.
Also read: Investing for your child's education
This article was originally published on December 24, 2024.
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