Where to invest for near term high priority goals | Value Research Investments made for fast approaching non-negotiable goals should avoid aggressive instruments...
Ask Value Research

Where to invest for near term high priority goals

Investments made for fast approaching non-negotiable goals should avoid aggressive instruments...

I am eligible for an interest free loan of Rs four lakh from my employer. I need to pay for my daughters education expenses in 2015. I have been considering to take this loan now and repay after the need is met. My big concern is where to invest this money, because equity investments are risky, bank deposits are useless because of low interest rate and high inflation. Gold is not a reliable commodity given at current market rates. Fixed income mutual funds look like a reasonable option. I am not sure what will be the likely return and what is the risk involved. Please advise.
- Pramod Kumar

Paying for your daughter's education is a non-negotiable expense which you need around a foreseeable time. With just two years at hand you have to be cautious in your choice of investment. Any aggressive investment carries the risk of eroding your funds. You have followed the right logic to rule out your options.

You should consider investing in short-term debt fund with a growth option. The growth option will save you from Dividend Distribution Tax (DDT) which is deducted by AMCs before paying out dividends in the dividend option.

You can make a lump sum investment in short-term debt funds. These funds invest in government bonds, bank Certificate of Deposits and corporate papers with average maturity between one and 4.5 years. The two-year returns in this category have ranged between 6 and 11.6 per cent, and given an average return of 9.46 per cent over two years. There are a few outliers in this category that have given negative returns too, so choose a well-rated fund for your investment.



Have a different question in mind? Ask us


Other Categories