Invest in mutual funds for your child’s future

Invest in mutual funds for your child’s future
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The world has become a smaller place, with many young graduates getting placed in companies in countries abroad. So, it totally makes sense to explore better education avenues and even look at education abroad, to give your child multiple opportunities to flourish.

However, like everything else these days, education doesn’t come cheap. The cost of education from a good institute even a domestic one can set you back by a few lakhs; add in the cost of travel, accommodation, tuition preparation fees, you’re looking at a huge amount that you will have to be ready for each year.

One way to fund your child’s education is to take up a loan, but that just creates an additional burden for you to tackle in your middle years. The other much more systematic way is investing in a mutual fund that helps you realise your child’s dreams. Here’s how you can start investing in mutual funds:

Determine corpus required

The first step is to find out how much will your child’s education cost you in the future. If your child is 5 years old today, and you need funds for his college education when they are 21, then you need to understand how much funds you will require after 16 years. Another major factor to consider while ascertaining funds required is accounting for inflation. You can use education cost calculators available online to arrive at funds required

Investing strategy

Once you have arrived at the funds you need and the time horizon, you can plan your monthly investments in mutual funds accordingly. By starting a SIP (Systematic Investment Plan) you can ensure that you invest regularly. You can start with SIPs into a mix of large cap and mid cap equity funds and even small cap funds.

If you have a lump sum amount saved already, it makes sense to invest in a debt fund and then transfer it systematically into an equity fund, based on market conditions.

Track your portfolio

Review your portfolio and fund performance at periodic intervals to determine how your fund performs with respect to its benchmark.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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