How do I build a corpus of ₹2 cr in 12 years for son’s education?

My husband and I are doctors and we have a 6-year-old son. We have been investing in fixed deposits (FDs), direct stocks and a few mutual funds, and have accumulated ₹26 lakh so far, including ₹18 lakh in FDs. We want to accumulate ₹2 crore in 12 years for our son’s education and ₹3 crore for both of us in 15 years. How much will we have to invest to meet our goals?

—Name withheld on request

At present, most of your money is parked in fixed deposits which may not be able to generate higher returns for you considering the time horizon of your investments.

You can park six months of your mandatory expenses in fixed deposits and invest the rest in better avenues like equity mutual funds. You also mentioned investing in direct stocks, which is good. However, one needs to devote more time and have access to reliable information on the companies to invest in direct stocks. While the idea is not to discourage you from direct stock investing and considering that you both may continue to be busy in the future, mutual funds are a much better option for you to invest where experienced fund managers take care of your investments.

If you keep ₹10 lakh in fixed deposits for contingencies and invest the remaining ₹8 lakh in equity mutual funds along with the existing portfolio at 12% per annum growth, you will be able to reach approximately ₹62 lakh in 12 years.

To build the remaining corpus of ₹1.38 crore for your son’s education, you will have to invest ₹45,000 every month for the coming 12 years. For the other goal of ₹3 crore. you will need a monthly investment of ₹64,000. Hence, for both goals, you need a monthly investment of ₹1.09 lakh.

You can also follow a strategy of stepping up your investments annually in such a case since it will help you to start with a lower monthly commitment at present. Some of the funds you can consider to invest are UTI Nifty Index Fund, Nippon India Large Cap Fund, Parag Parikh Flexicap Fund, 360 One Focused Equity Fund, Kotak Equity Opportunities Fund and HDFC Mid Cap Opportunities Fund.

Harshad Chetanwala is co-founder at MyWealthGrowth.com.