NPS Vatsalya: Build long-term wealth for your child with smarter investment strategies

In this episode of Investors' Hangout, Dhirendra Kumar discusses how the NPS Vatsalya scheme offers a viable option for parents looking to build long-term wealth for their children. He breaks down the structured approach of NPS Vatsalya and highlights areas where the scheme can be improved to maximise performance, including increasing the maximum equity allocation from 75% to 100%, the importance of prioritising educational expenses over retirement, and why contributions up to ₹1 lakh annually should be tax-exempt.
Learn how, with a few key changes, NPS Vatsalya can become a powerful investment tool for securing your child’s financial future.
𝗖𝗵𝗮𝗽𝘁𝗲𝗿𝘀 :
00:04 Introduction
00:33 An overview of NPS Vatsalya
02:53 Is it reasonable to have the withdrawal limit set at 25% of the contribution?
04:47 Can NPS Vatsalya be used to build wealth for children?
05:56 Viewer's question: If I have a portfolio of 5 equity fund 'categories': Flexi Cap, Mid Cap, Large & Mid Cap, Small Cap, and a Contra/Value maybe. Is it advisable to have more than one fund in each equity category while maintaining the same overall allocation as a way to hedge against AMC and manager risks in active funds?
08:30 Key Takeaways
Here are the Key Takeaways:
- NPS Vatsalya offers a viable option for building long-term wealth for children through a structured investment approach.
- While promising, certain provisions within the NPS Vatsalya scheme can be refined to improve its overall effectiveness.
- The current maximum equity allocation of 75% could be increased to 100% to better optimise performance over a 10-year horizon.
- The 25% withdrawal limit may be unreasonable and should prioritise educational expenses over retirement for greater utility.
- Contributions of up to ₹1 lakh annually should be made tax-exempt under the NPS Vatsalya scheme to encourage greater savings.
- With substantial improvements, NPS Vatsalya could become a highly attractive investment option for parents aiming to secure their children's financial future.
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