Mutual Fund Investment for your child’s future
July 27, 2020
Plan for your child's future with Mutual Fund Investments. In the long run, it can help you earn good returns, which you can use for education, weddings or even home purchases. Let us get to know how Mutual Fund Investment can help you plan your child's future.
As a parent, you try to keep up with your child's present needs. You may never give a second thought when you buy expensive toys, clothes, or a reputed school and other things. As much as you toil for your child's present happiness, has it ever occurred to you to give as much importance to their future? When you chase your goals, like saving for your new car or home or going on a luxurious trip, saving for your child's future can often take a backseat. You need to save money for your children, considering that tuition, school and college fees are at an all-time high. It is better to be prepared financially than to regret it later in life.
For your child's future, you need to think beyond the traditional saving methods as they fail to beat inflation. It is best to begin with Mutual Fund Investment. Another reason for picking mutual funds is that it offers much better returns based on your risk and investment horizon. Before knowing the best investment picks, let us get to know what mutual funds are.
Mutual Fund Investment is a process of pooling money from a group of investors. You get to invest through an Asset Management Company (AMC) or a Financial Broker who manages the pooled money and investment in securities. AMC or the broker is responsible for allocating assets in a portfolio that minimises risk patterns and helps investors meet their goals. There are various types of mutual funds - these include Equities, Debt and Hybrid.
Let us understand with an example of how Mutual Fund Investment can benefit your child's future.
Below are the assumptions:
- Sriram Shetty is a parent of a 3-year-old kid.
- His investment time horizon is 15 years.
- He has set a target corpus of Rs 1 crore.
Equity Mutual Funds are highly risky. If Sriram has a high risk-appetite, he opts for an Equity scheme. He can reach the targeted corpus faster in a matter of 13 and a half years considering the rate of 15% per annum*. On the other hand, if he chooses to invest in a Debt Mutual Fund scheme, the expected return Sriram can accumulate is Rs 68 lakh at the rate of 8%* in the assumed time. Debt funds could be less risky and help you fall short of the building of the corpus.
*Interest rates are related to market volatility.
This is how Mutual Fund Investment can help accumulate funds for your child's future. It is advisable that if you have more than ten years of investment horizon, select Equity schemes. If you're willing to invest for five to ten years, it is suitable to invest in Equity and Balanced Mutual Funds.
To sum up, it all depends on your choice of fund, your risk tolerance level, and the returns you aim for. Make sure you first evaluate the fund's goal before you decide any investment. Additionally, while investing in funds, you should learn to ignore the short-term market fluctuations and focus on earning returns.
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