Planning education finances for your child is no child's play and need a meticulous approach and as you have ample time in hand given the condition that you start early i.e. soon after the birth of your child, you can even lap up risk elements that serve a good deal in offering better returns. Though a mix of both debt and equity shall best serve the purpose and if you specifically take on the shelter of mutual funds, here are some of the mutual fund schemes which given the current time are likely to play out well in the long run.
Interestingly, why is there a demand in such pre-planning, it is because the times are so uncertain and inflation on everything from food article to medical expenses to education have skyrocketed. And as per reports, the cost of education in 10 years time has increased in 3-digits and so we can consider than on an average there is a hike by 20% every year. So, to let our child fulfill his or her education dreams and such that they are not left in a lurch because of financial constraints we as parents need to plan ambitiously as well as meticulously.
Why mutual funds can be a good investment option?
Though its never a good idea to put all the eggs in one basket, for your financial goals you need to diversify your portfolio. Here is suggested some reasons why mutual funds can still be a good deal.
1. Mutual funds that too via SIP route which is a disciplined way to investment is time and again suggested by experts to provide you enough corpus if you have a time horizon of around 20 years
2. In the case when the market sees correction you can invest a lump sum amount to further take on the advantage of rupee cost averaging and hence better rates for you and sooner achievement of your goal
Type of mutual funds that can be opted for child's education needs
1. Diversified equity funds: These appear to be apt as they tend to less volatile in the long run.
2. Multi cap funds
3. Debt funds that carry the lowest risk only in a case when the time horizon for the financial goal is relatively low or you are highly risk averse
4. Hybrid funds: To create a balance between risk and safety.
5 Mutual fund options that have been even topped on return parameter:
1. Axis Children's Gift Direct Growth: Fund has 68.66% investment in indian stocks of which 48.66% is in large cap stocks, 8.8% is in mid cap stocks, 3.91% in small cap stocks.Fund has 27.19% investment in Debt of which 3.52% in Government securities, 23.24% in funds invested in very low risk securities. Its NAV as on January 17 stood at 15.54 and year to date returns equate to as much as 14%. The scheme commands an expense ratio of 1.07
2. LIC MF Children's Gift fund Direct plan: With fund size of Rs. 12.46 crore, the scheme's expense ratio is 1.39%. The scheme's one year return has been 16.17% and YTD return stands at 13.86%. und has 88.64% investment in indian stocks of which 63.5% is in large cap stocks, 15% is in mid cap stocks, 0.83% in small cap stocks. Its NAV as on January 18, 2020 is 20.107.
3. ICICI Prudential Child Care Fund Gift Plan Direct Plan: It has a whopping fund size of Rs. 661.51 crore and expense ratio of 1.76%. The scheme's one year return have been at 9.54%. The funds NAV as on January 17, 2020 was 156.55, higher by 0.08%.
4. HDFC Childrens Gift Fund Direct Plan: This commands a fund size of Rs. 3103.96 crore and its year to date return has been 10.24%. The fund has 66.04% investment in indian stocks of which 35.09% is in large cap stocks, 10.59% is in mid cap stocks, 12.19% in small cap stocks.Fund has 24.21% investment in Debt of which 6.31% in Government securities, 17.9% in funds invested in very low risk securities. As on January 17, 2020, the funds NAV was 135.04. Expense ratio of the scheme is 1.27%
5. UTI CCF Investment Plan Direct Income Payout: With a fund size of 325 crore and expense ratio of 1.93%, the scheme charges 4% exit load, if the scheme is redeemed before one year. On January 17, 2020, the scheme's NAV was 41.91. Its year to return has been 11.94%. Minimum investment under the plan is Rs. 1000 and the plan cannot be subscribed to through the online channel.