How will you benefit from investing early in mutual funds?

Studying overseas from a renowned university has emerged as the best education option, as it gives wings to the dream and better career prospects. But, the Covid-19 pandemic has affected many aspirants. Especially those who were in the middle of their course.

The immediate lockdown forced universities to cancel classes, and the students were stuck as almost all countries had shut their borders. While those who got admission and were planning to start their academic year had to extend the joining which hit their costs.

According to an HSBC report for overseas education trends in India, 44% of Indian parents sent their kids overseas for education in 2019. But, funding for a child’s foreign education needs a large corpus, which cannot be fulfilled by savings alone. And, if you have not planned for it, you may have to end up taking an education loan.

Here are five important things to be considered:

Understand the cost and add it to your plan: Many factors come into play here. One must track the rupee vs dollar exchange rate and also track the education inflation in the country you want to send your child. An average one-year cost for a two-year MBA programme from Harvard University would cost you around Rs 80 lakh. Hence, the overall amount needs to be calculated which will include tuition fees, student health insurance, academic supplies, and cost of living (accommodation, food, conveyance).

Inflation and exchange rates: For an overseas education plan, consider your country’s inflation rate and your currency’s possible depreciatory movements. Do some research to calculate the extra amount you need to add to the education savings fund you have already started. “You need to consider the costs of the most preferred countries which are the USA, Canada, UK, and Australia. Add 5-6% average inflation in these countries with 4-5% rupee depreciation against that currency, then you have to ensure the portfolio of your child’s foreign education should grow by 10-11%,” said Amit Kukreja, Founder- Wealth being Advisors.

Find the right investment options: Apart from creating an education fund, you also need to invest in various investment options like Mutual Funds, Bonds, and equity markets. Depending on the risk appetite between moderate to high along with the duration, you can select your funds. “Mutual fund investment in foreign funds is also a good option. Channelizing investment with an equity-based investment with the longest possible duration would give you the desired return,’’ Kukreja said.

Start as early as possible: An early start will give you time to make better investments for your child’s international education.

Take Expert advice: Even if you start early, prepare a budget, create a costing plan, and research available investment options, you may still feel underprepared with your strategy and action plan as the calculation for planning foreign education finance include various aspects. You should take professional advice from experts on both fronts. A  financial advisor and foreign education expert can help you explore the available options and draw up a more comprehensive and realistic plan.