Ihave two kids aged 13 and 11. I have recently accumulated Rs1.5 lakh in savings which I want to invest in mutual funds for my children’s education. If I did not have a lump-sum, I would have taken SIP (systematic investment plan) route; but the problem is that I have lump-sum.
MLF’s Reply: Investing a lump-sum in equity could be risky. A better way to invest is to first select a top-performing equity mutual fund scheme. You can invest the lump-sum in a liquid scheme of the same fund house and, then, systematically transfer an amount into the equity scheme every month. This reduces the risk of investing a large amount in a single investment at the wrong time and at a high price; your investment in a liquid scheme will earn a higher return than your savings account.
I wish to invest in an equity mutual fund with a prospect of long-term benefit, at least 10 years through SIP, for my children’s (aged 8 & 3) future education. After 10 years, I need a sum of Rs1 crore. Please suggest the appropriate mutual fund products for my goals.
MLF’s Reply: Investing through a systematic plan would be an ideal way to save regularly towards your goal. Considering an average growth rate of 12% for equities, you would need to save at least Rs43,500 per month for the next 10 years to reach your goal of Rs1 crore. For more on SIP investing, please read: “SIP Smartly”
. This Cover Story details the periods when SIP works and when it doesn’t.
We suggest that one should invest in large-cap and multi-cap equity schemes as these have a lower risk compared to mid- and small-cap-oriented schemes. One needs to look for consistent performance, low expense ratio, portfolio composition, etc.