As parents, you seek the best for your children. You try to do everything possible to secure their future. Beginning from their growing years to their education and marriage, every parent wants to provide the very best to their kids. But rising inflation rate and higher cost of living can often act as barriers in fulfilling the goals of securing your child’s future.
For example, a professional postgraduate degree from a well-established, reputed institution could cost approximately Rs. 10 lakhs today. In the next 15 years, assuming an inflation rate of 10%, the cost could go up to Rs. 42 lakhs. This highlights a crucial point every parent must consider – investing in avenues that can offer inflation-adjusted returns.
Mutual funds can be an ideal option, as they provide liquidity, tax benefit, diversification, professional management and a host of other benefits.
How do I get started?
You can invest in direct mutual funds, approach an asset management company for buying mutual funds offline or buy mutual funds online. Once you familiarise yourself with what is a mutual fund you realise there are different types of mutual funds that you can invest in. Depending upon your time horizon, you can select the mutual funds that meet your goals.
For example, if you are looking for a long-term investment, you can opt for pure equity mutual funds. These can give you high returns in the long run despite risks of short-term volatility. If your spectrum of investment is low, you can opt of debt mutual fund investment plans or hybrid funds with shorter investment horizons.
How can I achieve my goals by investing in mutual funds?
There are three ways through which you can achieve your goals through mutual funds:
- Systematic Investment Plan (SIP)
You can invest in mutual funds through SIPs that invest small amounts at regular intervals for a long term. Since the investment goes through multiple market cycles, it helps you reap benefits through ‘Rupee Cost Averaging’. You automatically buy more mutual fund units when the Net Asset Value is low and vice-versa.
- Systematic Transfer Plan (STP)
STP allows you to transfer a fixed amount from one scheme to another at regular intervals. Also, you can lock gains from equity funds by assigning the same to short-term debt funds and reduce the effects of short-term volatility.
- Systematic Withdrawal Plan (SWP)
SWP allows you to redeem a specified sum at a pre-determined date, on providing specific instructions to the fund house. Such plans can help you attend to regular expenses as well, such as your child’s education, college fees and so on.
It is a good idea to start investing early to secure your child’s future and protect them against uncertainties. Mutual funds can be an excellent investment tool in generating inflation-adjusted returns to meet your goals.