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Summary: Your child’s education bill will show up on time. Markets might not. This story flips the usual ‘best fund’ hunt into a time-based game plan: when to chase growth, when to calm down and why a well-timed loan can beat a last-minute equity gamble.
My son is nine years old. Please suggest suitable mutual funds for his education after he turns 18 – Naresh Reddy
Nearly every parent dreams of giving their child the best possible education. For many, mutual funds feel like the natural choice. They are relatively cost-effective, professionally managed and have the potential to compound wealth quietly over time. It is no surprise then that parents often spend hours searching for the ‘best mutual funds’ to build an education portfolio.
But markets do not move in a straight line. Corrections and crashes are inevitable. At the same time, education costs continue to rise sharply. Thus, the real risk is not choosing the second-best fund. It is reaching the admission year only to find that a market downturn has eroded the corpus you worked so hard to build.
That is why education planning is less about chasing top-performing funds and more about building a resilient, crash-proof portfolio, one that can grow when time is on your side and protect capital when the deadline is close.
With that in mind, let’s look at the mutual fund categories best suited for your child’s education goal, based on how many years you have left.
Picking the right funds based on your timelines
The rule is simple: long horizons can afford volatility because time allows recovery. Short horizons cannot. Thus, your timeline should decide your fund category, not your optimism.
When your goal is at least 10 years away
Since you have a sufficient time period (at least 10 years), equity funds should form the core of your portfolio. Though they may not deliver immediate returns, equity funds yield handsome long-term returns.
Consider investing in flexi-cap funds, large-cap funds or index funds. They capture broad market growth without depending on a narrow theme.
Although mid- and small-cap funds can be considered, their allocation should be limited. Why? Over the past 10 years, category averages show annualised returns of about 17.7 per cent for mid-cap funds and 19.1 per cent for small-cap funds. However, higher returns come with deeper falls.
During the 2008-09 market crash, large-cap funds fell around 54 per cent on average. Mid- and small-cap funds tumbled even harder, roughly 60-64 per cent. Their recovery period was also longer. While the Nifty 100 (representing large-cap stocks) recovered within 1.9 years, the Nifty Midcap 150 and Nifty Smallcap 250 took 6.2 years from the same crash.
The lesson is not to avoid growth. It is to build it on a diversified and resilient base.
When your goal is 5-10 years away
Despite a narrower time period, equity still matters. While there is enough time for growth, recovery windows become shorter.
And so, you should avoid undertaking concentrated or aggressive bets. The goal is to manage risks rather than maximise returns. Here, diversified equity funds such as flexi-cap and multi-cap funds remain suitable rather than pure equity funds.
When your goal is 3-5 years away
With an even shorter window, it can be tempting to take on a large exposure to equity in an attempt to ‘catch up’. However, equity markets disappoint precisely when time is limited.
At this stage, hybrid funds can help balance growth and protection. Category averages over the past five years show annualised returns of about 11.8 per cent for aggressive hybrid funds, 10.1 per cent for balanced advantage funds and 8.7 per cent for equity savings funds.
The purpose here is not to create wealth quickly. It is to reduce the probability of a huge setback. As the deadline approaches, certainty becomes more valuable than incremental return differences.
When your goal is less than three years away
At this stage, capital protection should be your priority. Though some equity funds have posted strong one-year returns, outcomes over two to three years can be far less dependable, especially when the deadline is near.
In such cases, debt funds are ideal. While they may not be as rewarding as their equity counterparts, they carry much lower risk, providing steady, stable returns over time with minimal downside.
Since you are nearing your goal, liquid and short-duration funds are ideal. Over the past three years, category averages have been about 6.7 per cent for liquid funds. At this stage, avoiding a sudden 10 or 20 per cent fall matters far more than squeezing out an extra 1 per cent.
Investing in equity for the short term comes with a higher risk of negative returns
Negative return risk drops sharply as holding period rises (%)
| Fund category | 1 year | 2 year | 3 year | 5 year | 7 year |
|---|---|---|---|---|---|
| Liquid | 0 | 0 | 0 | 0 | 0 |
| Short duration | 0 | 0 | 0 | 0 | 0 |
| Equity savings | 3.8 | 1.9 | 0 | 0 | 0 |
| Aggressive hybrid | 14.7 | 3.5 | 1.9 | 0 | 0 |
| Flexi-cap | 19.6 | 4.7 | 2.4 | 0.3 | 0 |
| Large & MidCap | 20 | 5.9 | 2.8 | 0.3 | 0 |
| Large-cap | 20.8 | 5.2 | 2.1 | 0.5 | 0 |
| Mid-cap | 20.2 | 10.2 | 3.9 | 0.6 | 0 |
| Small-cap | 26.1 | 12.4 | 6.5 | 0.9 | 0 |
| Data based on rolling returns of category average funds. Period considered from January 2013 to February 2026. | |||||
What you should be mindful of
It is possible that you have been steadily investing in your child’s education fund, but you may still end up with a shortfall. In these instances, you can try to bridge the gap by taking an education loan. It can help cover the deficit without exhausting your assets or forcing you to liquidate investments at the wrong time.
The guardrail is simple: use the loan for the gap, not as a substitute for saving, and keep the EMI comfortably within your cash flow.
The bottom line
A good education portfolio is not a collection of the top funds from every category. It is a portfolio that grows steadily when time allows and protects capital when markets fall. The objective is simple: ensure that a temporary downturn does not permanently shrink your savings or force you to compromise on your child’s education plans.
To know which mutual funds will help you build a solid, crash-proof education portfolio, subscribe to Value Research Fund Advisor. Here, you can access our list of analyst-recommended funds and get a customised portfolio plan that will keep you on track to meet your goals.
This article was originally published on February 18, 2026.
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