I have been blessed with a baby girl last week. I want to make a one-time investment to take care of her higher education after 20 years. I am thinking that her college fees would be the future value of the present day ₹25 lakh.
- Gaurav Kumar
It is a great idea to start investing for your kid's higher education right away. Starting early helps one to build a sizeable corpus with a small investment, especially when one is opting for regular investments. You haven't mentioned why you want to make a lumpsum investment. Unless you are flush with funds at the moment but fear for the future, it may not be a great idea to invest a lumpsum. This is because you would require to commit a large sum at one-go and it may compromise your other financial goals. For example, assuming an annual inflation of 7 per cent, the future value of ₹25 lakh after 20 years would be around ₹96,74,211. Assuming 12 per cent annual returns, you will have to invest a little over ₹10 lakh to build the corpus. If you can spare the cash, you may go ahead and invest the money in a staggered manner over a year in an equity mutual fund scheme.
If you can't commit such a large sum at one go, you can consider investing every month via a Systematic Investment Plan (SIP) in an equity mutual fund scheme to build the higher education fund for your daughter. You just have to invest ₹9,682 per month and if the investment makes 12 per cent return per annum, you may be able to build your college fund.
If you are a newcomer to the stock market, invest in a top-rated balanced scheme. Balanced schemes invest in a mix of stocks (65 per cent) and debt and they are less volatile than pure equity schemes that invest the entire corpus in equity. if you want to grow your money without facing a lot of volatility, opt for a balanced scheme. Here is our list of the best balanced schemes.
If you are familiar with the workings of the stock market, you can invest in a diversified equity mutual fund. Here is our list of the best diversified equity schemes.
This article was originally published on April 01, 2016.
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