4 SIP Plans for Child's Education

Every parent wants to provide the best education to his child. However, given the nature of education inflation, it’s imperative to accumulate a sizeable corpus by the time your child is ready to get enrolled in institutes of higher education.Systematic investment plans or SIPs in mutual funds can help you achieve the goal with ease. Before starting SIPs for child’s education, here are four things to watch out for.

Every mutual fund has a different structure, as the objective of each varies. Prior to starting your SIPs, check out the fund’s structure and its portfolio concentration. As child’s education is a long-term goal, it’s advisable to opt for equity funds, as they have the potential to generate inflation-indexed returns in the long term.At the same time, you must ensure that in a bid to chase high returns, your fund doesn’t end up investing in low-grade securities.

Before starting your SIP for child’s education, you must look at the long-term performance of the chosen fund. See how it has performed across market cycles, particularly during the bear phase. It’s the bear phase that tests the real character of a fund.Also, while analysing long-term performance, check out the consistency of returns. It is advisable to choose a fund which has delivered consistent returns over the years, beating benchmark indices.

Often an overlooked aspect, the calls taken by the fund manager play a vital role in the performance of a fund. Hence, it’s vital for you, as an investor, to check the track record of the manager and see how long he has been managing the fund.A manager sticking to a fund for a long time is an indication of his competitiveness. Having said that, you should especially check how the manager has steered the fund during difficult times.

You must opt for a fund that invests its assets across sectors and industries. To put it otherwise, there shouldn’t be concentration in a particular asset class or sector.When a fund is well-diversified, the non-performance of a sector is backed up by a well-performing one. With a well-diversified portfolio, a fund can negate volatility better. The final word Whatever fund you choose to start SIP for your child’s education, make sure to make an early start. This is because when you begin early, it gives more time to your money to grow, bringing in compounding into play.Also, a periodic increase in the SIP amount can help you garner a bigger corpus which helps you meet the diverse needs of your child’s education.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.