I have a nephew in college / high school and he had to say a few things about money:

1. I carry money to school, but never lend it to my friends: I am not sure whether I will get it back from them or not, so I do not lend it…..NINJA anyone?

His father is a banker. I told this kid we adults lend to people like Dr. Vijay Mallaya, Adag, Gmr, Gvk, etc. and have huge ‘Will never come back loans’ and these are euphemistically called NPA. I have no clue why they are called assets.

2. I buy things only at a sale: He has bought a second hand camera lens (Oh my God!), a bicycle and many small utilities from flea shops / websites. No credit card, he pays cash on delivery.

I told him adults buy shares only when prices are increased – they sell when prices fall. I showed him how individuals pour money in a rising market, but withdraw when it goes down. The mutual fund inflows flummoxed him, and he said ‘why does everybody not just do a SIP and forget what is happening in the market.

He wondered whether to learn finance from me. Adults as a specie was worrying him.

3. I do not stake my lunch money: He buys food at the school canteen. He does not risk that – keeps it in the school bag (not in his pocket). I told him adults put their next month’s EMI money in the share market…and wonder what to do if the FnO deal goes wrong.

4. He has invested in 2 funds (chosen by him with help from the net). Another colleague’s son came to me for investing – I asked him to do research. He vanished. Of course my friend is very rich and perhaps can afford it. My views are different though. I asked him how he chose the equity fund. He said very simple Large cap fund with the HIGHEST AUM – his explanation was many of the companies which he had heard about was present there! Also if so many people had invested it had to be good (come on kid was in 9th standard when he started this SIP). I do not know whether this is a good logic, but in the past 3 years he has been in Hdfc top 200 – not a poor performer! Yes he has no debt assets – ‘coz he has not reached the chapter on ‘asset allocation’ !

5. He has kept it simple – his dad is his fall back option! His portfolio has done well in the past few months – the kid has not panicked, not withdrawn, not stopped his 1k per month sip!

He hopes to be a crorepati before his age of 30 years. God bless.

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  1. @ Kiran:

    Please dont fall prey to such articles. There are carefully worded articles.

    Reason 1: Not all MFs have higher than 1.35% charges.
    Reason 2: They have carefully removed the insurance part which is a substantial amount. Just imagine how much it would be, especially when you are investing a big amount every year.
    Reason 3: They have not mentioned all the charges that are applicable.
    Reason 4: Can they deliver the kind of returns that you get from good funds?
    Reason 5: The article has no mention of the track record of the fund.
    Reason 6: The bonus that they give out in terms of periodic units, does add to the total returns. However, if you consider the time value of money, it does not adds to the IRR at all in most of the cases.

    Go for a combination of Term Plan and a good MF instead of opting for ULIPs.

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