Which mutual fund scheme should you choose to fulfil children’s long term goals ?

• Follow

Now, there is no need for a separate bank account in the name of your children to invest in mutual funds.

Securities Exchange Board of India (Sebi) recently allowed parents or legal guardians to invest from their own bank accounts in mutual fund schemes for their children.

Investing in products like mutual funds is easy, but the first thing to keep in mind is that goals or dreams for children can never be predetermined. You cannot estimate how expensive their further education will become. Especially if you are planning to send your child to a foreign college or university. The cost of education is also continuously increasing within the country.

<Alpha 3 in> For proper planning of children’s education, you need to review your financial planning at least once a year so that you can get close to your goal. In order to achieve your mutual fund target, then, you need to diversify your portfolio by including different kinds of assets in it.

This will reduce the risk and volatility and would ensure different income streams.

Financial experts say that by investing in passive mutual funds or equity mutual funds, you can reap benefits in the long term that will assist you in achieving your child’s future goals.

One way to save money for your children’s higher education is to invest through a Systematic Investment Plan (SIP) in a mutual fund.

By doing this, money will be deducted from your account automatically on a predetermined date, and your funds will continue to be invested.

If you invest in a traditional fund with a relatively lower risk, putting in a SIP of Rs 5,000  every month assuming an annual return of around 7 percent, then, after 20 years, you will have approximately Rs 2,619,827  in hand. However, if you start investing through SIP in an equity fund that provides an annual return of 12 percent, you will accumulate a total corpus of Rs 4,995,740 after 20 years.

Investograhy founder and CFP Shweta Jain says that if you want to invest for a child then investing early will really help. As this will lead to the compounding of your investment for longer time. Starting late means lower return.

If even a small amount is invested and kept growing, then the early start holds significance. A few additional years can make a substantial difference. For investing for children, Uti Nifty 50 ETF, DSP Nifty Equal Weight Index Fund, and Kotak Emerging Equity Fund are good schemes.

SIPs are considered a good investment strategy because they provide good returns and are convenient. You can also achieve your future goals through the right SIP investments. So, choose a reliable SIP according to your financial goals and risk tolerance, and then give your investment a chance to grow.