Embarking on the journey of mutual funds to secure a child’s higher education comes with a set of strategic considerations. For a new investor looking to allocate Rs 5,000 monthly over the next 12 years, a prudent approach involves two key steps outlined in a recent Economic Times report.
First and foremost, the emphasis lies on precise goal quantification. This entails calculating the current cost of the envisioned course, factoring in inflation and taxes for accuracy. For instance, with a current course cost of Rs 10 lakh and an annual inflation rate of 8%, the projected target after 12 years would be approximately Rs 20.12 lakh. To meet this goal, a calculated monthly investment of Rs 6,244 is recommended.
The report underscores the importance of understanding one’s risk profile as the second fundamental step. Given the extended investment horizon for a child’s education, the guidance leans towards considering equity mutual funds. However, aligning the chosen mutual fund category with the investor’s risk tolerance is crucial. For a conservative risk profile, large-cap funds are recommended, while those with a moderate risk appetite may find multi-cap funds suitable.
Acknowledging the novice status of the investor, the advice is to seek the guidance of a mutual fund advisor. Beyond tracking investments, an advisor offers personalized advice, especially during market uncertainties. This tailored guidance proves invaluable for a first-time investor navigating the complexities of mutual fund investments.
