BackHow to invest for the education of your child, retirement
Usually, for a child’s education, parents prefer the ages of 16, 18 or 21 years depending on their plans
PremiumI am a 36-year-old doctor earning ₹1 lakh a month. I have a ₹42 lakh home loan (EMI of ₹37,000). I want to invest in mutual funds for my son’s education (he is 4 years old) and for my retirement. Please suggest good mutual funds with a track record. I can invest around ₹20,000-30,000 monthly which can be increased subsequently.
— Name withheld on request
It will be good to have a goal amount and time horizon for your son’s education and retirement. Usually, for a child’s education, parents prefer the ages of 16, 18 or 21 years depending on their plans. You can consider creating a corpus for your son’s education for 12, 14 or 17 years. As you are a doctor, your retirement may not be similar to those in the service sector where they are certain about their retirement age. However, you can consider a retirement age for better planning.
If we assume your retirement age as 60 and a time horizon of 14 years for your son’s education. In the 14th year, you would be able to accumulate approximately ₹2 crore by investing ₹30,000 every month and annually increasing the investment by 10%. The corpus is calculated assuming a 12% return p.a. You can use a part of this accumulated amount for your son’s education and the rest for your retirement.
To get better clarity, if we assume you keep aside ₹1 crore for your son’s education and continue to invest the rest of the amount along with annually increasing SIPs, you would be able to accumulate approx. ₹7.25 crore till the age of 60 for your retirement as well. I would suggest you consult with a financial advisor for this. However, you may consider beginning with SIPs of ₹6,000 each in these funds - UTI Nifty Index, Parag Parikh Flexicap, Kotak Emerging Equity, Canara Robeco Emerging Equities and SBI Focused Equity.
You can review these funds every six months to check how they are performing. As your SIP amount increases, you may add more funds. However, try to restrict this to 8-10 funds.
Harshad Chetanwala is co-founder at MyWealthGrowth.com.
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