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Where should I invest the divorce settlement money?

Dhirendra Kumar suggests an appropriate fund for investing for your child's education

Where should I invest the divorce settlement money?

I have received Rs 20 lakh from a divorce settlement case. I want to set aside this amount for my son's higher education, who is now 5 years old. Where should I invest this amount?
- Ankita

This amount is particularly important, as it's for an important goal. Nevertheless, the goal is still far away - maybe 13 to 15 years away. So, you can take some measured risk with this investment so that it turns out to be very meaningful.

The inflation of education cost is dramatically higher than what we have experienced and it may not remain that way in the future. But what I have seen in the last 25-30 years is that the configuration of the cost of education has changed completely. So, I would say that there are two rules to follow. One, invest in an aggressive hybrid fund if you have never invested in the market or invest in an equity fund if you have little experience of the market.

The second important rule, which I think you should never violate, is that do not invest this Rs 20 lakh over the next two-three months or at one go. Make sure to spread it over the next 18 months to two years because averaging the money helps in reducing the risk. While this may at times amount to losing some opportunity, but it is okay because if the market falls further soon after investing a lump-sum amount, it can be very disheartening.

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