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Nandini's friend had come over to look at her wedding photos. It was clear from the photos the amount of wealth that was spent on the venue, decoration, wedding dress, food, and so on.
But only Nandini knew the true story behind the lavish wedding day. She remembered the numerous compromises her parents made to get her married off in a grand way. 'You are our only child', they had said despite Nandini's protests to not spend their entire savings.
Now as a mother, Nandini also wants her daughter's wedding day to be celebrated like a festival. She has already started saving and investing in mutual funds.
In India, though parents wish to make their child's wedding the most memorable day of their life, unfortunately, many overshoot their budget and go neck-deep in debt. Most Indian parents feel obligated to bear the wedding expenses on their own while the children contribute very little.
And since it is a once-in-a-lifetime occasion in their child's life, parents don't mind spending their entire savings. They are ready to sacrifice or postpone their dreams and ambitions for the sake of their child's future needs. But consequently, parents are perhaps compromising on their own retirement needs.
Therefore, it becomes very necessary to have a separate fund for your child's big day. And it is also important to be rational while planning the kind of wedding you want for your child and not give into any societal pressure.
[Read: Why shouldn't you spend extravagantly on weddings?]
Do you think Nandini has made the right choice to depend on mutual funds to build a corpus for her daughter's wedding expenses?
Is there really a way to have a wedding corpus without killing your dreams, eroding your savings, or drowning in debt?
First, you need to decide whether you would like to have a low-key wedding, moderately opulent, or a very lavish one.
Remember that even a low-key wedding could cost you several lakh rupees. The type of wedding you want to plan will give you an idea of cost estimates. Of the expenses to be considered, food and venue form the major chunk of expense. The other expenses include decoration, clothes, jewellery, music, and so on.
If you start saving as early as possible and invest in wealth-creating avenues such as mutual funds, you will be saved from the trouble of gathering funds from various sources at the last moment. There is a myriad of schemes (across categories and sub-categories) to choose from. So, making the right choice based on your risk profile and the time horizon of the financial goal is important.
And if you have started early to financially plan to get your daughter married in pomp & style, it can accrue a bigger corpus for the wedding day. It would not be a herculean task if you start investing a small amount every month via Systematic Investment Plans (SIPs) - it can prove to be a rewarding investment strategy.
On the contrary, in case you put off investing for a few years to achieve the same goal amount, you will have to set aside a larger sum every month or else you will end up with a smaller wedding day corpus.
[Read: How To Be Mindful While Planning For Your Child's Future?]
Thanks to inflation on all commodities, wedding expenses increase every year. When planning for future wedding expenses, take into account the future value of expenses to build a sufficient fund. Once the future value of every expense is estimated, you can calculate the amount that will need to be invested monthly. You can start investing this sum monthly in mutual funds through Systematic Investment Plan (SIP).
For a bigger time horizon, i.e. 10 years or more, allocate a higher sum towards equity funds. Equity funds have the potential to give high returns in the long-term, albeit with a certain level of risk.
As the time horizon reduces, the exposure towards equity should be gradually reduced. Instead, the allocation of debt and money market funds should increase. This will reduce the overall risk of the portfolio and also provide stability.
When the time horizon left is less than 3 years, shift your corpus to safer avenues like bank fixed deposits and debt & money market instruments.
As gold forms an important part of wedding rituals, you can also invest a portion of investible surplus in physical gold as well as gold ETFs/gold mutual funds, as a hedge and portfolio diversifier. Gold funds can be later redeemed to purchase wedding jewellery.
A well-defined asset allocation strategy is capable of resilience in different market conditions and can help you reach your financial goals in a systematic manner.
Table: How much to allocate between equity and debt for different investment horizons
| Years to goal |
Equity allocation (%) |
Debt allocation (%) |
Gold (%) |
Type of funds |
| More than 10 |
75-90 |
10-25 |
5-10 |
|
| 5-10 |
60-75 |
25-40 |
5-10 |
- Large-cap
- Large & Mid-cap
- Mid-cap
- Multi-cap
- Balanced/Aggressive Hybrid
- Medium/Long Duration
- Dynamic Bond
- Corporate Bond
|
| 3-5 |
40-60 |
40-60 |
0-5 |
- Large-cap
- Balanced/Aggressive Hybrid
- Liquid/Overnight
- Dynamic Bond
- Corporate Bond
- Short Duration
|
(Note: This table is for illustrative purpose only)
Do note that if mutual fund schemes aren't prudently selected and you don't hold the worthy ones, your investment portfolio may not be on track to achieve your financial goals. Additionally, you must review your portfolio at least once a year and make changes if necessary.
Nandini opted for PersonalFN's mutual fund research services, which is helping her today to sensibly invest in a variety of mutual funds so that she can make her dream come true.
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Happy Investing!
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