More on investment planning

Now he has a 5 year old child. The insurance policy that he has taken will mature by the time his son is 18 years when bonus will be payable to Mr. Smith. From a standard insurance company, the average yearly bonus payable is Rs.48 per thousand sum assured. Hence, for a sum assured of Rs. 2,00,000/- Mr. Smith can expect a bonus of Rs. 9,600/- per annum which may amount to nearly 2 lakhs. ( However, this bonus is not guaranteed ). This bonus is in addition to the frequent inflows of Rs. 50,000/- (25%) on sum assured that will be paid on the 5th, 10th and 15th policy year.

In order to generate a substantial corpus for his son, Mr. Smith should invest the regular inflows from the insurance plan in an equity diversified scheme. The investment can be made either as a lump sum or through the systematic investment plan route. The investment can also be made in child funds.