- Wondering which investments can help mop up the corpus required for the higher studies of your child?
- Well, you can choose from top-performing small cap, large cap and multi-cap funds
Seeing the children pursue their higher studies successfully is the dream that doting parents see and want to realize in their lifetime. The dream will remain a dream only if it is not aided by a prudent financial plan that also takes into account the inflation.
As of now, the average cost of higher studies in India comes around to be ₹10-25 lakh a year. When it comes to the western countries, the average cost comes out to be ₹20-40 lakh a year. In addition, the accommodation can touch ₹10 lakh a year. Adding all that, the total average cost can be ₹30-50 lakh a year.
These are hefty amounts, aren’t they? But these expenses are only going to rise further. So, you need to plan early to accumulate such tall amount to meet the educational aspirations of your kids.
One of the best ways by which you can arrange for educational expenses is by investing in the power of equity mutual funds that can rake in a significantly greater surplus money over time. These funds put money across multiple stocks so that the money can turn big. Let’s check out through this post as to which equity mutual funds you should be investing to mop up the desired education surplus.
Which Equity Mutual Funds are Most Suitable for the Education of Your Kids?
You can go with a mix of small-cap and multi-cap funds. Small-cap funds have the potential to offer aggressive returns, hence brightening the educational prospects of your kids. But these funds can come under the pressure of increased fluctuation risks as the investments are predominantly in small companies. So, your risk-appetite has to be high when you are investing in these funds.
You can also invest in a multi-cap fund that takes route of stocks across the market capitalization to mop up the surplus. The multi-cap fund is arguably the most diversified equity funds around.
Recommended Equity Funds to Invest in
Now, the job lies in selecting the exact fund to invest in. You can thus glance at the table below showing a list of small-cap, large-cap and multi-cap funds.
|Equity Funds||5-year Return||10-year Return|
|SBI Small Cap Fund||17.72%|
|Reliance Small Cap Fund||12.83%|
|DSP Small Cap Fund||11.30%||18.15%|
|HDFC Small Cap Fund||11.87%||13.58%|
|Franklin India Smaller Companies Fund||9.55%||16.41%|
|Aditya Birla Sun Life Small Cap Fund||9.57%||13.42%|
|Aditya Birla Sun Life Equity Fund||10.49%||12.57%|
|SBI Focused Equity Fund||12.38%||17.95%|
|DSP Equity Fund||10%||12.27%|
|Motilal Oswal Multicap 35 Fund||15.19%||-|
|Reliance Multi Cap Fund||7.97%||15.10%|
|Axis Focused 25 Fund||13.28%|
Note – The data is sourced from Value Research as on August 6, 2019, and pertains to the regular plan of the schemes shown above.
Portfolio Allocation You Should Make to Mop Up Education Surplus
You should invest 80% in equity and the remaining 20% in fixed income instruments such as debt funds, fixed deposits, etc. Of the 80%, you can invest 40% in small-cap and 20% each in large and multi-cap funds.
How to Invest in Equity Funds Online?
You can invest in these funds online at Wishfin, a financial marketplace wherein you can check, compare and choose the best mutual fund. All you need to do is to follow the below mentioned process.
- Go to www.wishfin.com
- Click on ‘Mutual Funds’
- Go to ‘Register’
- Enter your mobile number
- Click on ‘Get Started’
- Mention your name, email ID, the city you live in
- Create a password that conforms to alphabet, numeric and special character requirements
- Click on ‘Sign Up’
Your account will be created so that you can login.
- Go to ‘Explore Mutual Funds’
- Click on ‘Equity’ icon
- A list of equity funds with different ratings, denoted in stars, will flash on the screen
- Click on ‘Invest’ below any of the top-rated schemes you wish to invest in
How Much Should You Invest in Equity Mutual Funds?
You should invest in these funds via a Systematic Investment Plan (SIP) that can not only compound wealth over time but also reduce the impact of fluctuations in between by averaging the cost of investment.
As far as figuring out the monthly investment amount goes, it will depend largely on the goal amount you want to achieve in the given time horizon. Assume the educational expenses to rise by 30%-50% in 15 years from now. In that case, the cost of higher studies in India and abroad is likely to be ₹15-40 lakh and ₹40-75 lakh a year, respectively.
So, you can switch on to the SIP goal calculator to know the amount you should be investing monthly. You need to state the goal amount, followed by entering the assumed annual rate (enter anywhere between 12%-15%) and investment period. After that, the calculator will tell you the amount you need to invest monthly.
Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme document carefully before investing”.