How to Fund Your Child’s Education Using Mutual Funds
If you are planning for a child’s future education, it is prudent to have a sizeable amount in the saving. Mutual funds can also be helpful for you in funding your child’s school or higher education costs.
Invest in the mutual fund portfolio that covers the expenses, and at the same time, it should not be a burden on your monthly budget, says India Infoline.
According to IIFL, you should take a few points in consideration for funding your child’s educational expenses. The points include; the stipulated amount for the child’s education, how many years are left for the said expense?, and what should be the expected amount of return?
The IIFL informs how to use mutual funds to secure your child’s future?
Have a head start
According to IIFL, it is better to start investing early, and mutual funds allow the diversification of having an extensive portfolio. As the mutual funds have the power of compounding, it can make a huge difference in the final sum of your investment.
Have a set goal before you start investing
When investing in mutual funds, the investor should have an end goal in mind, advises IIFL, while adding that “it is better to plan for the costs at a projected level by basing the calculations on the current costs”, if you are planning for a long-term goal. Further, invest in the mutual fund portfolio that covers the expenses, and at the same time, it should not be a burden on your monthly budget, it adds.
Use the SIP method
As we know that the Systematic Investment Plan (SIP) is the most favoured method of investing in mutual funds, the investor can invest in a MF scheme that aligns with their goal. “The SIP method requires the investor to invest a certain amount regularly and helps the investor to ride out the market fluctuations. SIP also has the benefit of rupee cost averaging where the investor will get units when the market price is low and buying fewer units when the market is high,” IIFL adds.
The advantage of the SIP investment is that you can fix the amount you are comfortable in investing.
You can also go for Systematic Transfer Plan (STP), wherein, you can invest a lump sum amount in a single fund and have the option of transferring them to various equity fund and debt funds to negate the risk or to diversify the portfolio, informs IIFL.
These are options where you can deposit your returns in a short-term debt fund where the risk is quite less.
India Infoline concludes that “It is a prudent action to save for the child’s education from the start but also to diversify the savings into mutual funds. It is time to divert from the traditional method of investing and look at various mutual funds that are available to cater to long-term goals such as a child’s educational expense.”
Disclaimer: This story is for informational purposes only and should not be taken as investment advice.
Source: Zee Business