Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |8334 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 01, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Vishal on Apr 30, 2024Hindi

Listen

Hello Sir. In Jan 2025, I'll receive a lumpsum of Rs 11L from one of my prior investment. I want to put this money in mutual funds. My horizon is 10 years. I want this corpus to be used for child college education. Please suggest how to go for it.

Ans: Your plan to invest the lump sum of Rs 11 lakh for your child's college education is a prudent step. Considering your 10-year investment horizon, here's a suggested approach:

Goal Clarity: Define the expected expenses for your child's college education, factoring in tuition fees, living expenses, and other related costs. This will give you a clear target to aim for with your investment.
Risk Tolerance Assessment: Assess your risk tolerance to determine the appropriate allocation between equity and debt funds. Since you have a 10-year horizon, you can consider a relatively aggressive approach with a higher allocation to equity funds for potentially higher returns.
Diversified Portfolio: Build a diversified portfolio by investing in a mix of equity and debt mutual funds. Equity funds can provide growth potential, while debt funds offer stability and capital preservation.
Asset Allocation: Allocate a significant portion of the lump sum towards equity funds to harness the potential for long-term capital appreciation. You can consider allocating the remainder to debt funds to provide stability and mitigate downside risk.
Regular Review: Monitor the performance of your mutual fund investments regularly and rebalance your portfolio if needed to maintain your desired asset allocation.
Tax Efficiency: Consider tax-efficient investment options such as Equity Linked Savings Schemes (ELSS) for equity investments and Tax-Saving Fixed Deposits or Debt Funds for debt investments to optimize tax benefits.
Systematic Withdrawal Plan (SWP): As your child's college education approaches, consider setting up an SWP from your mutual fund investments to meet the educational expenses systematically while continuing to benefit from potential market growth.
By following these steps and staying disciplined with your investment strategy, you can work towards building a corpus that will support your child's college education aspirations over the next decade. It's always advisable to consult with a Certified Financial Planner to tailor the plan according to your specific circumstances and goals.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.