Childs Education Planning with Mutual Funds

Child’s education is one of the top most priority for every parent and they do everything to provide their child with the best education possible with an intention to make their life even better than themselves. As we know the cost of education is rising constantly at around 10 per cent to 12 per cent. So as your child grows the cost would increase accordingly and many times would have been more than what you may have expected. So it becomes very important for you as a parent to manage your savings in a way which would help you beat the inflation.

If we talk of asset class then equities is the way to go that has shown to beat the inflation over long period of time. Equities comes with benefits such as they higher liquidity and better inflation-adjusted returns. Though they provide many benefits there is risk associated with it and one must not ignore this factor. So even being a conservative investor, you must have at least 20 per cent to 25 per cent of your investment portfolio in equities for long-term time horizon. Equity here means investment in stock market. So usually people don’t have adequate knowledge to invest directly in stock markets and even though if they have they don’t have that much time. So for such people equity mutual funds is the way ahead. These are the better structured products with transparency and potential to earn good returns.

So depending up on your risk profile and time horizon after which you need money you can opt for the appropriate category of mutual funds which suits your requirements to fund for your child’s education. If your risk profile is conservative and have shorter time horizon, then investment in large-cap equity mutual funds would be prudent and on the contrary if your risk profile is assessed to be aggressive then investment in mid-cap and small-cap equity mutual funds would be fruitful assuming the investment time horizon is long-term.