My daughter is 3 years old and I wish to finance her college education when she turns 18. Where should I invest to achieve this goal?

Over a 15 year time horizon, Equity tends to yield a better return than non-equity instruments. However, equity also is highly volatile!!


Therefore, the ideal way to meet this goal is to start a monthly Systematic Plan in an Equity fund or an Equity Hybrid fund. More important is for you to be willing to tolerate high fluctuations and to accept long periods of low returns during the 15-year journey.

The goal is 15 years hence, therefore, one should look at investing in riskier asset classes viz, equity or aggessive baalanced funds. At the same time, one should have sufficient term insurance cover on the earning member to take care of college education and other family requirements in case of any eventuality in the intervening period.


You might have to find out what is today's cost of Particular Course and what is the inflation for that particular course or degree start saving inline with your requirement to match the future expenses. As the Time Horizon is 15 Years you can Invest in Equity Mutual Funds on the 14 Year you might have to Switch your Investment to Debt or Liquid Funds to Avoid any Uncertainties

15 years is a very good time in the current situation in India to invest for a particular goal. You can choose to do systematic investment (SIP) monthly into equity funds (one large cap fund and one mid cap fund). If you do not disturb the same for 15 years and continue the SIP for 180 months, you will have more than desired amount for her education. You can then withdraw the necessary amount for education as and when needed and continue the SIP and hold on t othe remaining amount in the investment. 

Alternatively, if you want to invest a lumpsum amount then, please put the investment into a short term debt fund and put a 12 month Systematic Transfer Plan from this short term fund into 2 equity funds, one large cap and one mid cap. You will get average NAVs of coming 12 months for entry into equity funds and then hold it without disturbing for 14 years. The desired result will be achieved.  

You are better off investing money for her her higher education across well managed diversified mutual funds. Be a long term investor (at least 7 years plus). Invest across large caps (around 75-80%), mid caps (10-15%) and the balance across mid cap Mutual Funds

Also, across each market caps diversify through 2-3 MF schemes.

The best way to invest this corpus is through monthly investing by doing a SIP (Systematic Investment Plan) . Even if you have a lumpsum amount you are better off investing it in a liquid fund and transferring a fixed amount every month in the respective equity Mutual fund across 12 months through a STP (systematic transfer plan)


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