My daughter is six years old. I want ₹48 lakh for her higher education when she is 18 years old and ₹50 lakh for her marriage purpose when she is 26 years old. Should I invest in mutual funds through Systematic Investment Plans (SIPs) to create this corpus?
- Sugata Mukherjee
It is a great idea to start a Systematic Investment Plan (SIP) in an equity mutual fund to create a corpus to achieve long-term financial goals like higher education of children, own retirement, etc. If you are a newcomer to the stock market, you can consider an SIP in one or two top-rated equity-oriented balanced schemes. These schemes invest in a mix of equity (minimum 65 per cent) and debt and they less volatile than pure equity schemes because of this portfolio composition. The debt part of the portfolio offers support in times of volatility in the stock market. Here is our list of best balanced schemes.
If you are familiar with the workings of the stock market, you can consider investing in one or two diversified equity schemes to create the target corpus. Here is our list of best diversified equity schemes.
You will have to invest around ₹15,000 every month for 12 years to build a corpus of ₹48 lakh for your daughter's higher education and you will have to invest around ₹5,000 every month for 20 years for her marriage-related expenses. We have assumed a return of 12 per cent per annum for the calculation. Ideally, you should shift the money to a safer avenue like a bank deposit or a liquid fund at least a year or two before the actual event. This will ensure that a sudden volatility in the stock market do not upset your financial plans.