Choosing an investment product to accumulate funds for your child’s education might be a difficult process. To fund your kid’s education, you may have relied on bank fixed deposits, PPF, and gold. However, given the growing expense of education, you must make informed decisions to combat inflation and get the desired results.
Investing in mutual funds could be one of the better options to build long-term wealth. They do, however, need a certain level of expertise. Mutual funds are managed by experienced funds managers. At an investor level, financial advisors can be helpful in choosing the right product suitable to your needs, They help investors to mitigate the risk by proper portfolio diversification.
Mutual fund investments could act as the best way to save for a child’s college.
1. Managed by professionals
Mutual funds have the advantage of being professionally managed. Fund managers use their years of expertise and knowledge to efficiently allocate assets to reduce the losses on your investment corpus while maximising gains.
2. Small investments are possible
You can also consider an SIP (systematic investment option) to make small and consistent investments to accomplish your goal. You could opt for SIP by investing a minimum amount of Rs. 100 on some platforms, while other platforms or mutual funds may have varying degrees of minimum investment.
3. Well diversified
A mutual fund invests a group of investors’ money in a portfolio of stocks and securities across diverse industries. Mutual funds can also invest in other assets, including bonds, and commodities like gold. Diversification minimises the risk of investing in a single stock or sector while also allowing for better potential profits by providing a broader exposure to various companies, sectors and asset classes.
4. They are transparent
Another major benefit of mutual funds is the amount of information available to you as an investor. You can watch where and how the money is being invested on a regular basis. A mutual fund’s complete portfolio and investment plan are publicly disclosed, and the net asset value is updated daily online.
Based on your investor profile, the different types of mutual funds available to invest in are –
1. Debt funds
Bonds, corporate securities, money market instruments, and government treasury bills are among the fixed-income assets that debt funds invest in. Although these funds are likely to be safer, their returns are often smaller. They may not be the best choice for certain long-term objectives.
2. Equity funds
These funds invest in stocks, which means higher projected profits but also more risk. While stocks are considered riskier than bonds, the rate of return on equity mutual funds usually outperforms bonds, making them one of the preferred vehicles for long-term goals.
3. Balanced funds
These funds, as the name implies, split your money between debt and equity. The fund management company tries to maximise your profits while lowering your risks. This could give you the best of both worlds – debt stability and equity capital growth. These can also be used for long term goals like your child’s education.
Investing in a mutual fund schemes could be wise option for you to generate wealth for your kid’s education and other long term goals. If this a completely new avenue for you, you could sign up with a financial advisor to get tailor-made investment plans based on your goals and risk appetite.