Investing through mutual funds offers flexibility in terms of liquidity, risk-based choices, and return potential, making them an excellent tool for achieving long-term goals like funding your children’s education. Given your 10-year investment horizon, equity mutual funds are the ideal choice for building your target corpus, as they typically outperform debt and hybrid funds over longer timeframes.
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Equity funds are best suited for goals with a horizon of five to seven years or more, as they can deliver higher returns despite short-term volatility. Assuming an average annual return of 12%, a 10-year investment in equity mutual funds can help you achieve your ₹1 crore goal.
However, it’s crucial to factor in education inflation, which is often higher than general inflation. For example, assuming education costs rise at 10% annually, ₹1 crore in 10 years will have the purchasing power of ₹38.5 lakh today. If the estimated cost of education today is around ₹38 lakh, your target corpus aligns with your goal. Otherwise, you may need to reassess your target amount to ensure adequate funds.
Equity investments carry an inherent element of volatility, but a 10-year horizon helps mitigate its impact. Staying focused on your goals and being patient during market fluctuations are key.
Here are some equity funds you can consider:
ICICI Prudential Bluechip Fund
Parag Parikh Flexicap Fund
HDFC Large & Mid Cap Fund
It’s advisable to review your portfolio every six to twelve months to monitor its performance and ensure you’re on track. Periodic reviews allow you to make adjustments as needed, helping you stay aligned with your investment objectives.
Query answered by Harshad Chetanwala, co-founder, MyWealthGrowth.com
