Category Archives: Education

If you consider Tier 1 cities, then families of these cities spend almost an average of Rs 43,000 annually on the school education of their children. Tier 4 cities spend nearly Rs. 29,000 annually on children's education. In after-school education, an average parent spends 16,000 a year.   If you want to send your child to a quality university, you need to save money regularly for this goal for at least 8 years. Parents have to consider the rising education costs of education, and a suitable university, whether it is foreign or local. You also have to start saving towards living expenses like accommodation, food, transport, etc.  Applying for an education loan is the first option many parents consider when their child is ready for college. While you can opt for an education loan, it is advisable that you start saving money early in different investment schemes so that after 15-20 years, when your child is ready for college, the loan amount is reduced.  Ways to save for child education:  1. PPF Public Provident Fund is considered one of the safe investment options while investing for the long term where the funds are locked for at least 15 years. You can create a PPF account with any bank or post office and start saving your income for a good future return in the coming years. It has the ability to grow your money. The rate of interest of PPF in 2012 was 8.80 % which is now 7.60% in the year 2022.   2. Mutual Fund The fund grows when the market rises. The overall return after a long period comes through stocks, equity, debt, and even from money market funds. You can invest in a (systematic investment plan) SIP for both the short-term and long-term, and it is an efficient tool to save money.  Equity and debt are some securities where investors’ money is invested in mutual funds.  3. Fixed deposit A fixed Deposit is considered a safe investment option though the returns are comparatively low. If you invest a lumpsum amount through FD, you will get a fixed percentage on the amount. The interest rate ranges from 5.75% for regular investors and 7% for senior citizens for 1 year.  4. NPS National Pension System is a government-based savings option. The fund invests in government securities, bonds, and even equity. It provides investors with two options to invest in active and a default auto. In the auto option, the funds are invested in an automatic way. In the active option, the investor invests in the assets of their choice. It matures when the investor turns 60 years. The overall pension withdrawal amount is tax-free as per the scheme.  5. RBI bonds Taxable RBI bonds have a tenure of almost 6 years, and it gives an interest rate of 7.75% per year. It is available in the Demat mode, and it gets credited in the BLA( Bond Ledger Account) of the investor. For proof of investment, the bond is issued at Rs. 1000, and investors even get certificates of holding.  6. Direct equity Direct equity is another investment option to consider while investing in the long term. Though investors find it a risky option, the return is much higher compared to other investments. For 1, 3, and 5 years of investment, the return is 8,13, and 12.5 percent, respectively. source: pexels Hire a financial advisor  If you are still confused about the best savings option for your child’s education, then you can consider talking to the best financial advisors on the EduFund app. The financial advisor will guide you as per your financial needs and risk profile.    The upside is that all this can happen in a matter of minutes and a few taps without any hassle. Parents can take the expert's suggestion and invest the money accordingly to minimize risk and find a way to get a better return on investment. The financial advisors help you rebalance your portfolio on a regular basis to give your funds a better chance of growth when the market sees drastic changes.    Conclusion  As a parent, it is very important to start saving for your child’s education as early as possible to fight the rising costs of education. While applying for a loan is an option, it is wise to reduce the loan amount and save for most of the cost through investment to minimize or avoid the financial burden. FAQs How much do families spend on school education in Tier 1 and Tier 4 cities? Families in Tier 1 cities spend around ₹43,000 annually on school education, while Tier 4 cities spend about ₹29,000 per year. What's the importance of saving for education if you want to send your child to a quality university? To send your child to a quality university, regular savings for at least 8 years are crucial. Rising education costs and living expenses need to be considered. Should parents rely solely on education loans for college funding? While education loans are an option, it's advisable to start saving early through investment schemes. This approach reduces the need for larger loans in the future. Disclaimer:Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Did you know that the rise in your child's tuition fees results from rising inflation in India? Inflation affects the costs of fruits, vegetables, cars, and even houses, and education is not immune to this increase. Education inflation is not the only factor affecting the increasing cost of education. Factors like government funding cuts, higher cost of living, higher administrative salaries, better infrastructure, dollar appreciation, and higher demand for college education.  Here is how education inflation can hurt your child's future without you even realizing it. What is Inflation? Read More What is education inflation?   Education inflation refers to rising education expenses over some time. You probably heard that the Indian Institute of Technology (IIT), India's most celebrated government institutional body, hiked up its tuition fees. The universities increased the cost of tuition from Rs. 90,000 to Rs. 2 lakhs for all understanding courses. This increase could have easily driven any unprepared Indian parent to borrow money from the banks. Hence, this is the silent yet unrepairable impact of education inflation on your child's future.   Universities across the globe increase their tuition fees due to inflation to ensure the smooth running of their universities. This price hike has been consistently growing and has gradually resulted in high student debt, increased drop-out rates, and broken dreams of higher education and careers.   Education inflation's impact is not limited to tuition fees. This phenomenon leads to an increase in registration fees, university application fees, transportation costs, accommodation costs, books, and a sharp rise in food prices (mess prices). How to Protect Savings from Inflation? Read More Increased tuition fees    In 2020-2021, many Indian parents moved their children from private to public schooling amidst the pandemic. The cause was an increase in tuition fees at private schools despite the ongoing norm for online instruction. The impact of education inflation coupled with the loss of jobs and stagnant incomes led to this mass movement from private to government schools. While many students shifted schools, some were forced to leave it altogether due to a lack of financial and technology resources like laptops or phones for learning.    Similarly, according to the Unified District Information System for Education, over 39% of students aged 20-24 are forced to drop out of college to help their families and become earning members. This stems from a sheer lack of education planning as well as the unaffordable increases in schooling and college prices.     While many Indian parents struggle to provide primary education in India, there are those whose kids dream of studying at universities like Yale, Harvard, or Oxford. These parents need to be prepared to spend a significant amount on tuition fees and manage the cost of living in a different currency in foreign countries like the UK, USA, or Canada. The rising cost of foreign education   Countries like US and UK are prevalent among Indian parents and students. India is the second largest source of international students after China, and every year, these universities increase their tuition fees in response to the growing demand and inflation.    Over the years, the average cost of studying bachelor's in the United States rose by 497 percent (from 1985-86 and 2017-18). This is twice the rate of annual inflation in the same period.    https://www.youtube.com/watch?v=75tJ3oX1_Gw In fact, many overseas universities hiked their college fees for 2022-2023. The University of Pennsylvania announced a 2.9 percent increase in tuition fees, while Arizona State University announced that tuition fees would increase by 5 percent for international students. The University of Illinois will likely see a 1.5-2.5 percent hike in tuition fees.   Delhi University, India's most popular central university, recently increased its fees for all undergraduate courses and included service charges, facility fees, a college facility fund, and a student welfare fund. It will be an average of 10% increase in overall university fees across colleges.  How can you protect your child's college education from inflation?   Many parents do not realize the rising cost of education until it's too late. They have little to no option left - either they must compromise on the quality of education or go for education loans that take years to pay off. Both these options can dramatically impact your child's future and potentially risk their careers.    Saving and investing early is the right way to protect your child's college education. The sooner you start investing, the better it is. Time horizon can determine when you need the money, how much you need it, and how to reach the goal. These questions are fundamental when considering investing in your child's education expenses.    https://www.youtube.com/watch?v=jPHG8h87Dzo The country you send your child to can determine what should be the predominant asset class. If you are planning to send them to a foreign country, then considering US equities and US ETFs is highly beneficial the geographical diversification in terms of investing can help you cover the purchasing power parity in the future when your child starts spending in dollars or pounds.    If you have a young child studying in school and planning to go to college in 8 - 10 years, then investing and saving for their future is a must. You can start with mutual funds, equities, and US markets. If you are new to investing, consulting an expert who understands your needs, risk aversion, and goals is a must Talk To An Expert FAQs What is education inflation? Education inflation refers to rising educational expenses over time. Tuition fees and other costs increase due to factors like inflation, administrative salaries, and better infrastructure. How does education inflation impact students? Rising tuition fees lead to high student debt and increased drop-out rates. It affects registration fees, transport, accommodation, and food costs, impacting education accessibility. How does foreign education cost escalate? Universities in the US and UK raise tuition fees in response to demand and inflation. The cost of studying in the US increased by 497% between 1985-86 and 2017-18. Why are private school tuition increasing? Private schools hiked fees despite online learning during the pandemic, prompting some parents to shift their children to government schools due to financial strains.

Getting a loan for higher studies comes with a set of challenges and requirements. Whether your child is planning to pursue higher education in India from a premium institute or pursue international studies overseas, you are looking at spending anywhere from Rs. 15 – 20 lakhs in India to almost Rs. 70-80 lakhs overseas.   Recent reports released by the Ministry of External Affairs reveal that over 1.1 million Indian students are currently studying abroad as of 2021. Industry experts estimate this number will rise to around 1.8 million for higher education overseas in 2024. This would approximate a student spend of USD 80 million per year.   With so many students traveling overseas and spending such large sums of money, the business of funding students for overseas education has been growing rapidly in recent years. Parents often find it easier to avail of education loans overseas than to fund their children’s education in premium institutes here in India. Let us look at a few reasons for this:  Source: pexels 1. International universities are keen to have Indian students As the monies involved are considerably large, international universities take a huge interest in having Indian students come to their campus. With this in mind, several universities tie up with lenders and offer a host of flexible options (scholarships, grants, or financial aid) to make it easier for students to avail of education loans.   2. Sheer numbers mean more interested lenders Given the pace at which the number of Indian students traveling abroad for studies is growing, the industry has become immensely profitable. This has encouraged many private players to enter the education loans markets, with some interesting products.   This gives parents a choice beyond the Indian Public Sector banks that are fairly rigid when it comes to the reputation of the institute, collateral, payback terms, etc. Many students who are rejected for loans by public sector banks, approach these private lenders and obtain the loans they need to pursue their dream careers.   3. Parents can opt for international lenders Apart from banks and NBFCs in India, if your child plans to take up higher studies abroad, you can look at approaching international lenders. Their rules are different for eligibility and necessary collaterals, etc. Making it easier for Indian parents to access the funds.   4. International universities help students avail of loans from lenders in their own countries  This works as a blessing for the parents. If the student is unable to organize funds from India, some universities can put applicants in touch with lenders in their own country. The only hitch here is that the loan is in foreign currency, and is subject to international currency fluctuations.   5. Need and merit-based scholarships Several scholarships are available for Indian students planning to study abroad. Parents must start checking out the eligibility for these scholarships well in advance.  Things to keep in mind when a child is applying for financial support for higher studies  Choose a reputed university: While Tier II or III universities in low-cost countries may work out cheaper, you will find it difficult to get loan sanctions for such universities. Most public sector banks offer loans only for select international institutions, which are among the leading names in the country.   Manage to raise some funds from your own kitty: If you can manage to put in about 40 – 50% of the total corpus required, it stands you in good stead with several international lenders. They see this as a sign of surety and timely payback in the future, towards their own loans. Further, having your corpus will mean a smaller loan and a shorter payback time.   Maintain a good credit score: This is an important aspect of loan sanctions for international studies. While in India, the awareness around personal credit scores is still low, international lenders put a lot of weightage on credit scores. Your loan approvals and amounts sanctioned are determined by your credit rating in the financials market.   Keep your documents updated: All lenders will take into consideration the previous year’s financial statements, tax statements, and so on. Parents planning to take education loans must keep these papers ready for perusal at all times and must maintain good financial health to be eligible for loans. All in all, it is easier to avail of education loans for international studies than to get one for courses in India, as the number of lenders is less for Indian education loans. make sure you plan well and start building your corpus early on.   Keeping your loan to a minimum will ensure your child is not burdened with repayment as soon as college is over. That is no way to start living life as an adult! Talk To An Expert FAQs Is it easier to fund international studies? Yes, due to large student numbers and university collaboration, international education loans are often more accessible than loans for premium Indian institutes. Why do international universities assist with loans? International universities value Indian students and partner with lenders to offer flexible funding options like scholarships and financial aid. Can parents approach international lenders? Yes, international lenders provide diverse eligibility and collateral requirements, making funding more accessible for Indian parents. How to minimize the loan burden for students? Starting with a strong corpus, maintaining financial health, and keeping the loan amount minimal ensures students aren't burdened with repayment immediately after college.

Education expenses are soaring high in leading institutions. Hence, students of lower and middle-income states are finding it difficult to manage the associated expenses. One of the first considerations that come to mind while thinking about studying in a top institution far from the home city is the expense of accommodation and studying there. Students take out school loans and, in many instances, disregard the expenditures covered by the loan.  People perceive school loans from a particular perspective, viewing them as a limited funding source covering the tuition charge. But student loans have changed substantially over time, including much more than the average person may imagine. Below are some expenditures that financiers often include while providing education loans. These expenses being considered as a part of a loan shall differ from bank to bank:  Expenses covered under education loans 1. Tuition charges  University tuition costs account for over half of the entire cost of a student's higher university education. Tuition fees are the highest cost that must be paid to the institution. As a result, it is supported by all financiers like government banking institutions, non-banking finance companies, private sector banks, multinational lenders, and other lenders. One of the primary reasons individuals would take out an education loan is to pay for tuition charges since the remaining expenditures may be met if they do any part-time jobs.  Read more: Tips on how you can pay off educational loan 2. Tickets for travel  Traveling to a different state is a significant investment for children from poor and middle-income families. Though the amount is not too huge, many lenders will allow the provision to include the plane ticket cost in the aggregate loan balance. It is required to be considered that banks do not normally include travel expenses as a defaulted element of the loan. This can be incorporated at the borrower's desire. It is recommended to include the transportation cost in the loan for individuals who could not afford it.  source: pexels 3. Expenses associated with aids for studying  Studying is not limited only to education. Studying in reputed universities far from home city entails a larger range of activities to be completed as part of their studying process. This includes project work, research, group projects, scientific studies, etc. The value of college tuition charges should not be confused with expenses associated with studying. Many banks recognize this and, subject to a limitation, issue loans for library expenses, laptops, stationery, and so on. It's usually a good idea to check if the education loan funds the study expenses.  Read more: How much expensive is education abroad 4. Health insurance and coverage  Health insurance is not typically included with student loans. The majority of lending institutions don't cover the expense of health insurance. Still, some banks may agree to cover the expense of health insurance per the ask of the borrower. Therefore, just a few banks would consider health insurance as a portion of the loan.  5. Expenses for daily living  Living expenditures could be a fairly large bracket including eating, accommodation, everyday expenditures, etc, especially when studying in a different state from the home state. There is little consistency in how loans meet expenditures. Certain banks sometimes restrict monthly spending based on a percentage of the entire loan amount, whereas other lenders may use a different technique to calculate the corresponding living cost. It is important to consider the degree of coverage information and loan coverage while taking a certain loan. Education loan portfolio in Tamilnadu and all India level Up until 2013–14, both in Tamil Nadu and in all of India, the growth of the education loan portfolio was decelerating. However, in 2014–15, it surged to double digits, only to moderate in the years that followed. Tamil Nadu's increase of student loans went into the negative zone in 2018–19, while the rate of fall slowed down in 2019–20. Though southern states comprise a large share of PSB education loans, they also account for the majority of accounts that turn in non-performing assets and the total amount of outstanding NPAs Education loan interest rates 2022 Find out the most recent interest rates for student loans from the largest banks in India so you can compare rates and select the one that best suits your requirements. A variety of factors affect how much these loans will cost in interest. Conclusion  Students must evaluate the aspects discussed while managing funds for their studies when calculating the loan amount. The expense of education in top universities is significant, running into many lakhs and sometimes into crores. As a result, students must look forward to seeking advice from experts and financial institutions operating in this sector. With their recommendations & suggestions, students can be confident that their loan would cover all of their expenditures.   While considering expenditure coverage, consider that the loan must be returned, and the interest amount on the loan is substantial. So, enlisting the assistance of specialists will assist in weeding out less acceptable possibilities and incorporating the more essential recommendations. Thus, it will benefit the borrower in the longer - term. Consult an expert advisor to get the right plan for you TALK TO AN EXPERT

Are you having trouble deciding on the best college for your child? Wondering which course can help them in the future? What's the cost of their college, and how much money do you need to help them?  Your child's future depends on the college they choose. Even though you want to help him and advise him, your child should have the final word in this matter. After all, he will spend the next few years of his life in college.   Things to consider to help your child pick the right college 1. Education Quality  You should focus on the institution's teaching methods, the level of education it offers, and its prior academic achievement. You can accompany your child on a college tour so you can see for yourself how the professors are, meet current students, and hear their feedback. Your kid may choose to consider a foreign university, in which case you can contact the admissions office and get all your questions addressed. Don't forget to ask about the student-to-teacher ratio as well. It is very important for the type of schooling he will receive.   2. Location   Make sure the college you chose is accessible to your home and has all the amenities you require. Your child will be worn out before he even gets to college if the trip there is long. Consider they are the university is, the transportation options or if there are any hostels.   3. Finances   Choosing a college for your kid is among the most important decisions you can make. Even though college is expensive, you must stay within your means and select a school that you can afford. You can help with student loans and scholarships if they want to attend a college that is outside of your budget. If you have time on your hands, you can start investing in different tools and save up the amount as well!  4. Extracurricular activities    To foster your child's creativity, college life would be incomplete without some extracurricular activities. The activities could involve sports, drama, dance, or music. Confirm that the college she plans to attend offers courses in all the subjects in which he is interested.   5. Infrastructure   Academics are the main focus of the college, but without the right infrastructure to support them, learning may not be as efficient. Check the facilities, labs, common areas, safety measures, etc. when choosing the colleges.   source: pexels Questions you must ask your child before you start  Asking your child these questions will help him choose the best college   Why do they want to take the course?   What sort of extracurricular activities are they interested in?   Do they believe that the course will help them land a better career in the future?   Do they find the class interesting?   Do they want to study in this country or elsewhere?   What are their financial preparations if they decide to pursue an education overseas if you are unable to support them?   How do they believe the course will benefit them personally? Tips for Parents   Don't be afraid to ask questions: Parents shouldn't be afraid to ask the college administration many questions, such as how they would help the child socially, emotionally, and intellectually.   Multiple campus visits with your child before applying: The majority of parents only make one trip to college before enrolling their child. As a result, they might make a decision based on insufficient information. Parents' knowledge of the college will increase after several visits to the campus.   Don't get influenced: Finding the ideal college for a child should be a parent's objective, taking into account his preferences and interests. The majority of the time, friends' and family members' advice has an impact on parents. Determine the child's needs, then choose a college based on those needs.   Appearances can be deceptive: All parents desire to select a technical institution for their children. However, they must remember that appearances can occasionally be deceptive. Make sure the college uses the newest networking methods and technological advancements. To understand the teaching pedagogy of the teachers better, they must speak with them as frequently as they can.   Make sure the college prioritizes extracurriculars: A good college gives equal weight to students' extracurricular activities and academic performance. Parents frequently select a college based only on its academic reputation, giving little consideration to the extracurricular activities offered there.  Conclusion    Selecting the ideal college for their child can be challenging. Course preferences, location, and tuition fees, there are too many factors to consider. One way to simplify this decision is to start saving for your child's education fund! So, no matter where they want to study or what, you know their tuition fees are taken care of!  Consult an expert advisor to get the right plan TALK TO AN EXPERT

An education loan is a great instrument for pursuing higher education. With the cost of education rising every day, arranging for a massive amount for their child’s education is difficult and loans can ease that burden.  However, banks do not offer loans to everyone. Education loans have a high rejection rate.  Reasons why your child's education loan can be rejected  1. Academic performance  The academic performance of your child plays a vital role in deciding whether the loan can be approved or not. A student is usually expected to have average and above average marks on their report card to get a grant or a loan. The consistent score in the past few semesters and their performance in co-curricular activities are considered. Those students who have shown exemplary results in academic areas are given more preference for the grant of loans.  2. Missing documents  Incomplete information is one of the primary reasons for rejecting your child’s education loan. You must present all the documents the bank mentioned for the verification procedure. Also, you must ensure that you add the correct information while filling out the form. Check the form multiple times after you have filled it out. None of your documents should be fake. Make sure you get help from a bank professional if you do not know the steps. They will guide you with the further procedure.  Apply for Education Loan with EduFund 3. Admission to an unrecognized university  Banks often do not approve loans if they find the university unknown. They conduct a verification process on their level to know about the university. If unsatisfied with the data, they might cancel your child’s education loan application. On the contrary, they also ask for details from the parents to get a better view of the whole scenario. 4. Low credit score  A low credit score is another critical reason for canceling your child’s education loan application. The banks consider the score of your parent or the guarantee who will be signing the form. The application gets rejected if the guardian has not been good with repayments or has defaulted in the past. To increase the chance of the loan getting passed, it is advised that the parent or the guarantor should have a good record of repayments along with a healthy CIBIL score. source: pexels Type of education loan  The type of education loan is yet another factor that should be considered. Rejection rates are lower when you opt for a secure education loan (collateral-attached education loan). The unsecured education loan tends to get rejected during the verification process. You have to provide collateral such as agricultural land, your house, or some asset the bank can keep to get their money back in the case of fraud or non-payment. In the case of an unsecured loan, the pledged collateral is seized by the bank if the person taking the loan cannot pay the amount back.   Everything you need to know about education loans Read More Things to keep in mind while applying for an education loan a) Keep an account of the loan amount and policies  You should check the loan amount and guidelines provided by the banks. The procedures will vary with different principal amounts that are being borrowed. The interest rates also vary depending on the total amount of the loan.   b) Check the course, university, and eligibility  Make sure that the course and the university your child chooses are recognized. If the banks do not find them to be known, they might as well reject the plea for an education loan. Take proper guidance from an expert or professional to understand the course structure properly.   Next, check whether the university and course are eligible for the loan. Not only that, you must ensure that your child crosses all the eligibility factors, including citizenship, academic performance, and so on.   c) Interest rates offered by the banks   Make sure that you look at the interest rates and moratorium carefully so that you do not encounter any issues later. Some key points that require proper research are the duration of repayment, late payment fees, moratorium period, and so on. Usually, the interest rates for education loans lie somewhere around 9% to 15% of the principal amount. Do proper research on the long-term and short-term repayment periods to understand better what to choose. FAQs What are the reasons for education loan rejection? Poor academic score Lack of co-applicant Poor borrowing history of the co-applicant Courses that offer low employment options/ROI Choosing obscure universities that they not be accredited Type of education loan Incomplete documents Fake documents Country selection for the loan Insufficient income of the co-applicant How do you avoid loan rejection? To avoid loan rejection, you need to ensure all your documents are in place. Speak to the bank of your choice or take guidance from an education loan expert in getting all the documents, understanding the process, and the costs involved. Some tips are to make sure your financial history and your co-applicant's financial history are sound, your documents are real and your marks are on-point. Is an education loan easily available? Education loans are easily available in India. There are many lenders such as government banks like SBI, private banks like HDFC, Axis Bank, etc, and NBFCs like Avanse and Prodigy Finance. TALK TO AN EXPERT

In the previous article, we discussed 5 degrees for your child that can cost up to 1 crore. In this article, we will discuss the best way to save for any kind of education expense Saving and investing money is simpler when there is a goal in mind. For parents, their child’s education is the ultimate goal. Given the skyrocketing cost of education in India, it is one of the biggest financial outlays that families take into account.   This is because education is not just about tuition fees; it includes a host of expenses like a laptop, phone, course fees, etc. To make sure you can provide for all your child’s needs, let’s find out which is the best way to save for any kind of education expense.   Why is education becoming expensive?  The education inflation rate measures how rapidly educational expenditures have increased over time. Education inflation in India is presently between 10 and 12 percent, which is more than twice as high as inflation in the economy.  Most parents frequently find themselves going to banks to take out school loans, despite the rising inflation and education costs. Given that you have an added duty to make interest payments, this may not always seem sound advice. So, how should a parent save money for their child's education? Let's examine that in the part that follows.  Top ways to save for your child's education expense  Plan ahead and take the necessary actions to save money for your child's future. This will prevent financial constraints from impeding their ability to pursue higher education. So, these are the best ways to save for education expenses:  1. Set a goal amount for higher education  Parents generally don't know how much money to set aside for courses like medicine, engineering, the arts, science, and business. The annual costs for these courses range from Rs. 2.5 lakhs to Rs. 15 lakhs. When you have time on your side, you can save for this desired amount with a regular SIP and the power of compounding.  Once you've chosen the SIP amount, use the step-up function to raise it as needed with your bonus or extra cash flow. As your salary rises, you should ideally increase the SIP contribution each year.  2. Time is a big factor  For young parents, the ideal time to start saving is - before your child's birth. This allows you to financially prepare for their future and minimize the risk that comes with investing. By starting early, you would have sufficient money if you were saving consistently for 18 years. If you begin saving later than you intended, you may still be able to catch up by raising the amount you want to set aside each month.   3. Investment plans  The best way to save for any kind of education expense is through investing. Your saved money can be invested in PPF, ULIPS, and SIPs for kids every month. These alternatives allow you to set aside a sum of money every month based on your budget as well as goals.   Systematic Investment Plans (SIP)  Making money work for you is always an excellent idea rather than working for your money. Everyone makes an effort to save money, but you may be savvy and invest your funds to see your money increase. You can invest modest amounts on a regular basis using a Systematic Investment Plan (SIP), which will enable you to realize your goals.    Unit Linked Insurance Plan (ULIP)  Insurance providers provide unit-linked insurance plans that combine insurance protection with an investment strategy for investors. In this situation, a ULIP will be beneficial to you because it combines an investment and insurance plan.  Public Provident Fund (PPF)  There is no minimum age requirement to create an account with Public Provident Fund schemes, which are well-liked long-term investment plans. As a result, you can invest in a PPF for your child as it provides security, an alluring interest rate, and tax-free profits.  4. Look for Scholarships  Scholarship hunting in India is much simpler than you may imagine. With technology, finding scholarships and applying for them is easier. It may be simpler for you to obtain scholarships in India if you are a member of a specific caste or religion or come from a low-income household.  Always inquire about any available scholarships before accepting admission to any institution. These bursaries may be merit-based or available to low-income students. You can apply for merit-based scholarships by taking the exam that evaluates your knowledge and abilities. All they ask for from poor or category students is an income certificate and a category certificate.  5. Withdrawal plan  Even when investing long-term, the investment process is never static. Experts have recommended equity funds for individuals with an investment horizon of more than 12 to 15 years. However, it would help if you started moving money out of stocks and into debt five years before your target. Begin a planned transfer of funds from your equity fund to your short-term debt fund. It highlights the necessity to exercise caution while saving for an urgent need that cannot wait. Remember that your child's admittance to college has a set date.  When it comes to your child's education, having a clear strategy in mind is crucial. This is due to the significant disparity between present and future schooling expenditures. For your child's financial stability, it is crucial to establish a well-defined savings and investment strategy and implement it over the years! TALK TO AN EXPERT

A bond is a debt instrument that an investor purchases from the issuer and receives interest on it periodically. Financial institutions, companies, banks, non-banking financial companies, and the government provide bonds. Bond is one of the financial instruments that help companies finance themselves; it acts as a loan for these companies that raise money directly from investors.   Bonds are ideal for investors seeking low-risk investments, and they carry lower risk than equities and help diversify the portfolio. https://www.youtube.com/watch?v=iYJzL-H5sds What are some primary differences between bonds and stocks? Bonds Stocks In bonds, you provide an amount to the lender to invest in an organization/ government In a share, you own a portion of the company equity by investing. The person who invests in a bond receives a fixed interest over time from the issuer. An individual dealing in stocks sells the shares once the price rise.    These are a debt. The long-investment bonds are riskier. These investments are long-term and short-term. Long-term offers the potential to the investor. Safer investment option than stocks Profitable investment option than bonds   However, bonds are not entirely free from risks. If the company goes bankrupt, the investors stop receiving interest payments. In many cases, individuals do not get the principal amount as well. It is thus advisable to invest in bonds in India carefully. Analyze the growth and issuer’s creditworthiness. Companies with AAA ratings like HDFC Bank Limited or Infosys are considered the best bond issuer.   How to Invest in Index Funds? Read More What are the 5 types of bonds to invest in India?   Here are the top 5 bond types of investing in India:  Government security bonds   The Government of India issues this debt instrument. These are one of the safest bonds in India, and they do not carry any credit risk and pay interest semi-annually.  Corporate Bonds   Firms provide these bonds to individuals for a fixed period, and the account holder earns consistent interest over time. However, companies use the money to fund their business requirements; hence, these are highly risky.   Zero Coupon Bond  A Zero-Coupon Bond is a pure discount bond. In this, individuals do not receive interest or any benefit until the bond’s maturity.  Convertible Bond  It is a hybrid bond that acts both as equity and bond. However, it does not happen simultaneously, allowing the investor to convert a bond into equity and qualify for shareholder benefits.  RBI Bonds  It is also known as a Floating Rate Savings Bond (RBI). Released in 2020, the government pays interest every six months on the bond, and one has to repay the bond post 7 years of expiry.   https://www.youtube.com/watch?v=_vd24QDztRo Is Investing in a Bond beneficial?   Here are some popular benefits of investing in a bond:   Provides investors with a steady income source  Flexibility to receive interest income or receive both cumulative interest and principal on maturity  Some bonds offer tax benefits on returns and interests  Investors receive benefits from preserving or increasing the investments  Investors share a higher priority claim to assets in comparison to stockholders  7 Tips to Choosing the right bond  Individuals often dwindle between the right bond and a profitable bond. Here is how you must pick the bond:  Define your investment objectives  Analyze your risk-taking abilities  Identify the bond provider rating  Expected yield on the bond  Research the bond’s strengths, weaknesses, and future scope  Read the terms in fine print carefully  Decide whether a long-term investment is ideal for you.   How to invest in bonds in India?  One can invest in bonds through a primary or secondary market. In the primary market, an investor can invest in bonds issued by big companies. In this, the companies provide bonds to build capital. They release IPO (Initial Public Offering) to raise funds for generating capital. When a company raises capital from the market to expand its business or growth, it is termed an IPO.  In contrast, a secondary market exchange refers to organizations like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). Investors buy and sell stocks by operating in any of these organizations independently.  If you need a pre-mature exit, you can view a secondary market.  In the primary market, an individual has to undergo a documentation process to invest in bonds in the DEMAT account.   Purchasing a bond in the primary market is subjected to strict screening. The company offering securities reviews it and creates a prospectus outlining the details of the securities. In opposition, the secondary market offers more flexibility in trading.   Ways to invest:  By Connecting with a Bond Broker  Connecting with an authentic broker is one of the ways to choose and invest in the right bonds. Fees may vary from broker to broker.   Invest through Institutional Investors   In this, investors bids on government securities. The yield on the bond is less than the interest rate one receives. But a higher bid rate makes it profitable.  Purchasing Mutual Funds and ETFs   It is among the best and fastest methods for bond investing. The provider provides the best ETFs (Exchange Traded Funds) on your behalf.   Buying Bonds through RBI retail   If you are seeking government securities to invest in, you can do so through RBI retail. Register for a GILT security account under RBI. An investor needs to update the dashboard post-logging:  An investor must update details like- issue size, date of bidding, price per security, and bid value range  Place the bid by mentioning the investment value and security  Complete the payment  TALK TO AN EXPERT

In the previous article, we discussed, how to plan for your child's bachelor's in Australia. In this article, we will discuss how to plan your child's bachelor's in engineering Raising a child involves both, financial and emotional considerations. Along with retail inflation, education inflation is constantly rising.   Once you've determined the potential cost of Engineering education and which university to enroll in, the next question is how much you'll have to pay each semester.  You may relieve your concerns about your children's academic expenditures by taking a few simple actions like -  Being specific with your goals,   Calculating the cost of a bachelor's in Engineering across universities, and  Choosing an investment option.  Now, let’s explore them in detail.  Why is it necessary to have an early financial plan for education?  Per an ASSOCHAM analysis, the cost of primary education has increased by 150% in the past 10 years. Regarding professional education, the average rise in tuition costs at the top three IIMs has been roughly 242% in the past 5 years. Parenthood in the twenty-first century is not an easy task. Education inflation is constantly increasing by more than 10% each year. Consequently, managing educational fees for children is becoming a huge financial concern for parents.   Therefore, if parents plan and take the appropriate measures slightly earlier in a child's life, covering his or her higher education expenditures will not be a difficult challenge.  How to calculate the future potential engineering course cost?  It is definitely required to calculate the future potential cost of the present Engineering tuition fees.   The compound interest method computes the future rate of the present educational tuition expenses. For example, suppose the present course price for a Bachelor in Engineering degree is Rs 10 lakh and the inflation rate is 10%.   In that case, the prospective cost after 15 years may be calculated as Target so, you can concentrate on savings accordingly. Here’s how you can calculate -  Current Amount * (1 + inflation rate) Tenure = 10,00,000*(1+0.10) ^15 = 55,00, 000 (approximately).   Now that the target amount has been established, it is easy to select the types of financial products that would assist you in building a repository of Rs 55 lakh.  Infographic to show calculations of future potential education costs. Estimate future education costs   Today, diverse educational websites assist in calculating or categorizing the cost of a bachelor's in Engineering degree. Create a record of the current cost of the Bachelor in Engineering degree. At this phase, it is important to pick whether the child will study in their home country or abroad.  As a result, when estimating the Bachelor's in Engineering degree fees, one must also consider the currency component. Only after the present cost is known, determining the probable future cost of the degree on the projected timeline will be easy. This will assist in determining an acceptable savings goal.   Another factor to consider at this stage is inflation. This is because, with education inflation growing at a rate of 10% or higher, inflation is likely to eat into your funds. First-year total course expenses at the world's top engineering colleges. World's Top Engineering Colleges City/ State Course expenses  Massachusetts Institute of Technology  Cambridge, USA  $ 69,000 Stanford University  Stanford, USA  $ 63,000 University of California - Berkeley Campus  Berkeley, USA  $ 48,000 University of Cambridge Cambridge, UK  $ 68,000 National University of Singapore  Singapore $ 30,000 Nanyang Technological University  Singapore $ 33,000 The University of Melbourne  Melbourne, Australia  $ 50,000 University of Toronto  Toronto, Canada  $ 57,000 McGill University Montreal, Canada  $ 32,000 HECTOR School of Engineering and Management, Karlsruhe Institute of Technology Karlsruhe, Germany  $ 20,000   Course expenses at India’s top engineering colleges: India’s Top Engineering Colleges Course expenses  IIT Kanpur  Rs 8.38 lakh IIT Kharagpur Rs 10.46 lakh IIT Roorkee  Rs 8.58 lakh IIT Guwahati  Rs 8.56 lakh IIT Madras  Rs 8.19 lakh IIT Delhi  Rs 8.66 lakh IIT Bombay  Rs 11.51 lakh IIT Indore  Rs 8.75 lakh IIT Varanasi  Rs 10.41 lakh VIT Vellore Rs 7.83 lakh   Plan an early investment option  According to anyone's financial product expertise and risk tolerance, one can choose equities, borrowing, or a combination of products, including a diversified portfolio, which includes both equity and debt elements.  A child's education requires a minimum of 15 years to invest. And, for extensive goals, equities are the ideal asset type to concentrate on. If you started saving early, in about 15 years, the multiplier impact in the power of compounding kicks in; the longer the planning range, the greater the multiplier advantage. To combat excessive inflation, it is critical to employ a multi-asset financial strategy as education expenses have soared.  Education costs have gone up during the previous ten years: How to plan your child's Bachelor in Engineering?  Going by the increase in education costs might be alarming. After all, they are not insignificant quantities. The goal should be to participate in a proper instrument regularly and in the appropriate amount, and then you'll be capable of building this portfolio.  Traditional products, such as fixed deposits, may not be sufficient to cover your child's educational needs. Other products, such as equities funds, stocks, and balanced funds, should be considered. You can pick the investing programs based on your investment horizon and timelines. Before establishing an education fund, you should carefully consider the characteristics, dangers, and terms and conditions.  The number of students enrolled for various disciplines of Bachelors In Engineering is increasing every year. It's becoming a definite need for the parent to start an early investment strategy.  Number of undergraduate engineering students enrolled in India in 2020, by discipline (in 1,000s) Conclusion  Education expenses are rising, and if you don't start saving early, supporting your child's Bachelor's in Engineering education may become difficult. You must begin by outlining specific goals, like the child's desired schooling and the associated fees.   This can assist you in determining how much you can set aside for savings after paying all of your monthly expenses. As the objective financial approach, it is prudent to limit your stock exposure to mitigate the risk of adverse market fluctuations. TALK TO AN EXPERT

Changing courses after admission is fairly common! In fact, US's National Center for Education Statistics shows that 80% of college students end up changing their majors. So, what should you do when your child changes their education dream?  Discussing the matter with your child is a great start. But the first step is helping them understand their new goals and preventing them from panicking. For instance, if your child does not want to pursue an engineering career in India and instead wants to opt for graphic design from a foreign country, then there are a lot of financial parameters you as a parent must consider.  First, switching from engineering in India to graphic designing abroad will increase the cost of education you have anticipated. It increases the educational budget dramatically, forcing you to evaluate the best course of action to help them achieve their dreams. Making the switch easy on your child for the future involves financial and emotional support! How do switch educational courses?  Many students switch their majors and courses after and before joining colleges. This is why there are many colleges that allow you to transfer from a course and college. Every college has its own procedure to help students follow their passion. Once your child has decided to change their subject, they can speak to the student services offers, fill out forms and start the application process for the new course. Transferring to a new course is like applying from the start and involves the same type of effort and motivation. How should parents support their children during the change of course?  Allowing your child to transfer or change their career is not easy but in the long, highly beneficial. Even if they think of re-enrolling their name in a different education course, consider the bigger picture. Here are the things you can do as a parent:  1. Have faith in them  A progressive educational dream enables them to serve on high versions of life. Besides, it lets them think out of the box. At times, a dream makes your child stronger. Thus, encouraging them is the beginning step to helping them accomplish their career goals.  One quick note: Allowing your child to fulfill their educational dream helps them discover hidden talents, thereby exploring more skills. So, if your youngster has rediscovered the ultimate dream career, have faith in them. 2. Show them your support  Spend time with them to figure out their career path. Always retain trust & lend your helping hand whenever possible. For instance, if your child wants to pursue music instead of engineering, ask them why. If you get a valid reason, show your support.   3. Encourage them  Even if they have been admitted to a course recently, what matters the most is their interest. So, you must encourage your youngster to learn about the course they want to pursue Source: pixabay What steps should you take for your child's promising career?  After communicating with your child regarding the shift in education, you must take some crucial steps:  Look for internal transfers where your child can change their course yet stay at that same institution  Help them look for affordable universities that offer the same course if your budget is restricted  Your child may opt for deferring for one or two semesters if they think they need time to process the next move  Consider checking the costs involved with the transfer fees (note that transfer fees might be hefty, and if your child wants to pursue a course from abroad, it becomes more expensive)  One quick note: Early saving can help parents to afford the expense. If you are not ready with early savings, you can always opt for education loans. What is Re-Balancing? Read More Why would your child wish to change their course?  Each parent wants their child to get into a prestigious university. But if your kid has switched to another educational domain, you must not show your disappointment. Each individual has a specific preference, and undermining their area of interest puts them in a burdensome situation.  If your child opts for a different education path, it should not dishearten you. Instead, always try and analyze what made them prepare for another field.   As a parent, understanding why they wish to change their career is your prime responsibility. Endless reasons lead scholars to change their educational paths. The wrong course selection may end their career growth. So, if your child wishes to change their education dream, it might be because:   They cannot see themselves pursuing a career in that area after acquiring admittance  They are wondering where the course will take them to  They want to pursue a different career opportunity  Upon enrolling the name in that particular course, they have discovered an area of their choice  After outlining the reason, you must guide your child in changing their educational path accordingly.  You cannot predict if your child will change their career, but you can save for it! Start a college fund regardless of what your child hopes to study today and enable their tomorrow with healthy savings. TALK TO AN EXPERT

School fees have experienced multiple hikes in the past two decades in India. Did you know that private schools in India raised the price of tuition fees by 10% during the coronavirus pandemic? Shocking, isn’t it?   But the tuition fees aren’t entirely responsible for the increased cost. Just as inflation affects the cost of tuition; it affects the costs of additional school fees that parents have to pay. What are these additional school fees? Let’s find out!  Additional school fees that parents must save for Tuition fees are the basic amount you need to pay for your education. As your child moves to the senior class, this amount tends to increase. Schools usually charge this amount once every three months. Although it is the most significant chunk of the total amount, it still doesn’t equal half of the total amount paid. It can be somewhere around 50% to 60% of the total fees being paid. https://www.youtube.com/watch?v=VJ0F69KTZgs Academic books and school uniforms  When your child goes to school for the first day, they are asked to get certain books by the prescribed authors. Most of the time, schools collaborate with a shop that provides all these requirements. Parents and students tend to buy these necessities from the prescribed store. Similarly, school uniforms can be expensive and can add to the total cost of sending your child to a good school.  Transportation costs  Transportation is the next area where you have to pay a lot. Fuel prices have been rising every single day. In India, most parents prefer sending their children to school on public transport such as vans, buses, etc. According to a survey conducted recently, transportation cost is the third-largest contributor to the overall educational expenses of your child. It can go 12% to 15% of the total fees.  Tips to avoid overspending Read More Infrastructure costs  Every parent wishes to send their child to a school that provides good learning and has a good infrastructure. All the schools’ primary goal is to build new buildings in the first 20 years of their establishment. The infrastructure would include new facilities, science labs, computer labs, games room, auditorium, etc. These infrastructure setups are some of the most vital parts of an educational institution. Schools charge parents maintenance and accessibility fees for these. It is usually taken once every year at the beginning of the session accounting for almost 10% to 12% of the total fees paid in the year’s first half.  Admission fees  When your child is new to a school, you should pay an additional amount in the name of admission fees. This amount accounts for a significant chunk of the total cost. According to a survey, it accounts for the fifth largest head regarding school fees. Furthermore, when your child moves from primary to senior classes, you are supposed to pay the re-admission fees for your child. This amount varies significantly from one school to the other. Usually, it accounts for 8% to 10% of the total fees paid.  Tax Benefits on Child Education Fees Read More Activity and laboratory fees  Schools try to make learning interactive for your child. For this purpose, they conduct various activities which can help your child learn in a better manner. There are certain activity rooms constructed in the building where children go to perform different actions. Also, schools conduct various activities, including school trips, sports days, annual functions, science days, etc. This amount is usually asked at the beginning of a session. Some schools also ask for the required amount right before conducting the activity.   The strategy differs from one school to the other. Laboratories are an integral component of a school. Every school has numerous labs, including computer, physics, chemistry, biology, etc. Students go to these labs to conduct experiments and learn in the process.   These were some of the additional fees that add up to the total fees paid by the parents. We cannot deny that all of these components are extremely important. But simultaneously, it gets heavy on the pocket of the parents who are tight on budget.   You may not be able to stop costs from rising but you can save for this cost. Save today and give your child the future they dream of!  FAQs What are the additional school fees parents need to save for? Additional fees include academic books, school uniforms, transportation costs, infrastructure fees, admission fees, activity, and laboratory fees. How much do academic books and school uniforms contribute to the total fees? Academic books and uniforms add to the total cost of sending a child to school, and their expenses vary depending on the prescribed requirements. What percentage of the total fees does transportation cost contribute to? Transportation costs typically account for 12% to 15% of the overall educational expenses for a child. What are infrastructure costs, and how much do they contribute to the total fees? Infrastructure costs cover maintenance and accessibility fees for school facilities, and they usually make up around 10% to 12% of the total fees.

In the previous article, we discussed AUM in mutual funds in this article, we will discuss what is foreign investment. Financial institutions and individuals wishing to diversify their investment portfolios seek multiple ways to earn outside income. The increasing inclination toward stocks, IPOs, and bonds investments sparked the individual’s interest. They keep up with the latest investment updates.   Apart from this, Foreign Investment is considered a growth catalyst for India. Companies exploring opportunities for business expansion internationally benefit from it the most. Goldman Sachs, J.P Morgan, and Morgan Stanley are some leading international investors.   Some businesses seek opportunities to capitalize on relatively economic labor and production costs. Likewise, Indian companies seek relaxation from a tax perspective internationally.   There is a lot to know & understand about investments. The blog discusses nearly every nut and bolt of foreign investments.   If you are an active or ambitious investor seeking opportunities to invest in foreign stocks, this blog is worth a read. Let’s begin with the first things first.  What does foreign investment imply?   Foreign investment implies an investment of a native business or a company in the assets of an international company. It generally includes long-term physical investments made by an Indian company in a foreign company, listed on the stock exchange.   Foreign investment is of two types: Direct and Indirect. It involves cash flow transactions between countries. If the investor's stake is higher in a company, he shares the right to regulate the company’s decisions. These are long-term physical investments like - bridges, damn, and infrastructure in foreign countries.    For example, if a person or a business holds (a 75%) share in the company, they share the larger portion of the company’s equities available in the market. They can regulate and dominate the company’s decisions.   So, are you now clear about – What is the foreign investment?   Let’s move on to the most asked query under this.  What are the most popular types of overseas investment opportunities?  Foreign investments have two main categories- direct and indirect investments.  Direct Investments   Foreign direct investments are the equipment, plant, or factory an investor purchases in a foreign country.  Indirect Investments   Indirect investments imply purchasing stocks and equities of foreign companies listed in their respective countries.   Direct investments are much in demand than indirect investments owing to the long-term benefit prospect. The value of these tangible assets multiplies more than liquid assets. These boost the country’s economic status over time.  In contrast, indirect investments are short-lived. These are time-sensitive investments that do not share any future scope or value.    Given this, who can legally invest in these assets? Let’s find out.  source: pixabay Who is eligible for foreign investment?   Most individuals are anxiously googling-   “What is foreign investment?”  “How does the foreign investment work?”  There is so much to explore on the topic. But before that, one should be knowledgeable about the eligibility criteria to invest internationally.   If you are considering an overseas investment, check whether you meet the below criteria set by RBI (Reserve Bank of India):  Residents, corporate entities, and partnership companies registered under the Indian Partnership Act of 1932 are eligible for foreign investments.   These individuals can invest in foreign ventures or wholly owned subsidies.   Residents may invest according to Q3 of the law.  How can residents invest in foreign companies or ventures?   Residents can invest in foreign investments without any restrictions or limits. The companies they tend to invest in must have a 10% share in an Indian company listed on a stock exchange in India. It should be listed as of 1st January as the investment year.   How are foreign investments beneficial for the Indian economy?   FDI occurs when an individual or a company holds 10% dominance in a foreign asset or company. If an individual or business owns less than that, IMF deems it as a part of the stock portfolio. It might not grant complete control over the company’s politics but a percentage to investors.   Foreign direct investment grants power and dominance to influence the foreign firm’s operations. Foreign investment can prove beneficial for the existing economy.   1. Funding and expertise   Developing nations require the apt tangent and growth momentum to utilize their potential. Corporations operating in these countries need the expertise, guidance, and funding to expand business operations. Here Foreign investment proves profitable in upscaling a brand and nurturing its prospects.   As per research, “Global FDI collapsed in 2020 and plummeted from $1.5 trillion in 2019 to $859 billion”. It is the lowest ever recorded since 2008.  However, as per recent stats by Hindustan Times, “ The FDI inflow has increased by 23% after COVID blues. March 2020-2022 recorded an inflow of $171.84 billion inflow.”  It stands in steep contrast to $141.10 billion between February 2018-and 2020.  Thus, investments in the country can prove a breakthrough in economic terms.   2. Increases employment opportunities    What follows with growth is personal development.   India is facing the harshest blow post-COVID-19, she needs a comeback. With businesses shutting down, the country is losing momentum. FDI can breathe in the needed inspiration.   However, India can prosper independently, but a mere international push can open up a wide growth arena for the country and its people. FDI help create employment opportunities, especially in the manufacturing industry. It not only boosts the economy but makes its people independent.  3. Access to leading-edge tools and technology  To compete in the international market and gain an edge, India must optimize its economic structure. Foreign investment is one of the panaceas that share the potential to rationalize it.    It can promote access to advanced tools and technology that help streamline a business process and economic growth.  These are some popular growth opportunities that foreign investment can provide.  Which country topped the FDI index of India in 2022?   Singapore topped the FDI index with a share of 27%. It is followed by big giants US (18%) and Mauritius (16%) respectively.   What does FDI cover for India in the future?   As per Business Standard, “India recorded the highest ever annual FDI of $83.57 billion in the year 2021-22.” It reveals a progressive India in the coming years.   Furthermore, the “FDI to GDP ratio may rise by 2025.” The recent shift in FDI structure and the “Atmanirbhar Bharat” policy provoked the estimation.   Conclusion  It is evident from the listed facts and figures that foreign investment can ensure a profitable shift in the Indian economy.   If you are still confused regarding “What is the foreign investment?”, detailed research and analysis will help you gauge the importance of FDI from the Indian perspective. Consult an expert advisor to get the right plan for you   TALK TO AN EXPERT

“ETF trading at a premium?” or "What's the deal with ETF B selling at a loss?" Y. These are some questions you are likely to hear whenever advisors talk about ETFs. You can understand this better if you understand the different costs of ETF transactions.  ETFs have multiple "prices," as perplexing as they may appear. There's the actual value, determined by the net asset value (NAV) after each day and the intraday NAV (iNAV) in the midst.   The NAV of bond ETFs is set by the bid prices of the portfolio's underlying bonds. The NAV of an equity ETF is given by the most recent trading prices of the underlying stocks. The NAV is calculated based on the previous trading day's closing.  However, since ETFs are actively traded on a stock exchange, they have a current market price which may differ from their actual value. This market price will determine the premiums and discounts.   The ETF's latest traded price determines the market price of both equities and bond ETFs. For a stock ETF, that price will often fall within the bid-ask spread of the underlying basket of securities, but bond ETFs would more likely trade at a premium because the NAV is set at the lesser bid price.  If the price of an ETF is higher than its determined NAV, it trades at a "premium." In contrast, if the ETF's price is below its NAV, it trades at a "discount."  ETF prices and NAV are often closed in relatively calm markets. When stock markets become choppy, however, ETFs respond swiftly to shifts in market sentiment, whereas NAV may take longer to adjust, leading to premiums and discounts.  Let's look at it illustratively,   The market price of an equity ETF will often fluctuate within the basket's bid-ask spread. When the ETF's supply and demand are roughly balanced, trading takes place on the secondary market.   The ETF's market price may be momentarily pushed outside the limitations of the fundamental basket when there are more buyers and sellers in the market. Traders might profit from the gap between the ETF's market rate and the prices of the underlying securities if the ETF trades at a significant premium or discount.  When this occurs, the market maker can go to the primary market to deal with the ETF sponsor, issuing new ETF units when prices increase and redeeming ETF units when supply is low.   The primary market aids in re-aligning the ETF market price with the NAV. However, because the expenses are determined by the creation/redemption process, the ETF would often trade at a higher premium or discount to mirror those costs until the two-way order flow in the ETF recovers.  Since the ETF and its fundamental securities are two separate liquidity pools that are only loosely connected, this can happen at any time during the trading day.   Suppose bullish investors start bidding up an ETF more aggressively than its underlying securities. In that case, the ETF's price may climb faster than the underlying securities' price and, as a result, trade at a premium.   Similarly, if bearish investors sell an ETF aggressively, it may trade at a discount to its underlying stocks. Alternatively, premiums or discounts may develop if the ETF and its constituent stocks trade on exchanges in separate time zones.  Pricing transparency is offered through ETFs, which allow you to acquire the intraday price of any asset type. The problem is that the trade costs are explicit unlike mutual funds, they are not reduced to a single number by the end of the trading day.  It's critical to keep trading expenses in mind, especially in less liquid markets, and to resist following the herd, which can lead to acquiring at a markup and selling at a discount.   Despite their "designed for speed" nature, ETFs are still the best choice for long-term exposure to specific asset classes. FAQs What is the difference between the actual value and the market price of an ETF? ETFs have an actual value determined by the net asset value (NAV) based on the underlying securities prices. The market price, on the other hand, is influenced by supply and demand on the stock exchange and may differ from the actual value, leading to premiums or discounts. What does it mean when an ETF trades at a premium or a discount? If an ETF's market price is higher than its determined NAV, it trades at a premium. Conversely, if the ETF's market price is below its NAV, it trades at a discount. Premiums and discounts occur due to the interplay of supply and demand in the market. Why do premiums and discounts occur in ETF trading? ETFs respond swiftly to shifts in market sentiment, causing their market price to fluctuate more quickly than the NAV. In choppy markets, this can lead to premiums or discounts as the market price adjusts while the NAV may take longer to catch up. Consult an expert advisor to get the right plan for you  TALK TO AN EXPERT