4 Steps To A Mutual Fund Portfolio For Your Child's Future
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Step 1 Find out how much you need This will help you know how much to invest regularly. A Rs 1 lakh engineering course will require Rs 50.54 lakh in 18 years if costs grow at 6% annually. Assuming that equity funds provide 15% annual returns, you need to invest Rs 5,200 every month.
Step 2 Get basic understanding of mutual fund categories Understand the factors influencing performance, risks involved, possible returns and the time you need to stay invested. For instance, equity funds are higher risk investments that require you to stay invested for 8-10 years or more.
Step 3 Invest according to time at hand If your child’s higher education and marriage, is more than 8-10 years away, equity funds are typically appropriate. For needs that are 5-8 years away, like advanced sports coaching in high school, hybrid funds i.e. funds investing in debt and equity, work well. Opt for debt funds for requirements which are 3-4 years away.
Step 4 Have a separate mutual fund portfolio for each child Separate mutual fund portfolio for each child will prevent overdrawing for one child’s needs from the common savings pool. You also get a clear idea of the savings target and can evaluate your progress.
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