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Ultimate guide to top 10 best SIP plans for child education in India
Education has become very expensive in India. Statistics show that educational inflation is around 11% in the country today, and the cost of education is expected to soar in the future.
A report by the National Sample Survey Office (NSSO) during the period of 2008-14 stated that the annual cost of education burgeoned by 2.75 times when compared to 2008, whereas the per-capita income had only increased by 2.49 times, indicating the mismatch in the income growth and the increase in the cost of education.
High tuition fees coupled with the difficulty of paying bills and staying independent cause the highly qualified and bright minds to even refrain from applying to colleges. The tuition rates are increasing all over the world and are rising faster than the growth in per capita income.
Looking at these expenses from an exchange rate perspective, Rupee owners will always have a disadvantage in terms of the cost of overseas education due to our country’s Current Account Balance, relative interest rates and inflation which cause a weakening of the Rupee. For the near future, the trend would continue hence ballooning the fees even further.
Investing is a mantra that can be followed to rise above the tide of this soaring educational inflation. A wealthy corpus is accumulated and the effects are more prominent when the investor starts saving at an earlier stage owing to the compounding effect.
Why invest via SIP?
Reduce financial burden
This forms a habit of investment discipline by debiting a fixed amount from your bank account at every periodic interval. This also prevents a lump sum or a sudden outflow of money from your pocket, hence maintaining financial stability.
Start investing in small amounts
Most SIPs start at a minimal amount of Rs 500, which enables the investors to save for their child’s future – one penny at a time.
Rupee cost averaging
By investing through SIP, one can also benefit from Rupee cost averaging – where the cost of purchasing a unit of the fund is averaged over the time horizon thus protecting its investors from the volatile market conditions and price fluctuations.
Compounding effect
Investors also benefit from the compounding of returns, where the returns earned on the invested capital are re-invested into the fund.
Top 10 SIP plans for child education
Expense Ratio: 1.08%
Min SIP Amount: Rs 100
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance
Expense Ratio:
0.72%
Min SIP Amount: Rs 500
ELSS fund – Tax haven for 80C
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Expense Ratio: 0.96%
Min SIP Amount: Rs 1000
Low expense ratio.
Expense Ratio: 0.97%
Min SIP Amount: Rs 500
Low expense ratio.
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Expense Ratio: 0.97%
Min SIP Amount: Rs 500
The fund has been in the market for over 10 years.
Expense Ratio: 0.55%
Min SIP Amount: Rs 500
The expense ratio is on the lower end and the fund has no lock-in period.
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Expense Ratio: 0.77%
Min SIP Amount:
Rs 500
The expense ratio is on the lower end.
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Expense Ratio: 1.04%
Min SIP Amount: Rs 500
The expense ratio is on the lower end
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Expense Ratio: 0.38%
Min SIP Amount: Rs 500
The expense ratio is on the lower end
Expense Ratio: 0.95%
Min SIP Amount: Rs 500
The expense ratio is on the lower end.
When a fund crosses a certain AUM threshold, the returns from the fund tend to decrease or stagnate.
The investors should monitor the performance.
Which funds should you choose?
Selecting the funds which are tailored to your investment requirement time horizon, income, target corpus, and risk appetite is the first critical step that you should take as a parent investing for your child’s education.
One could start by investing in one fund and then diversifying to 2 or 3 funds by proportionately investing across the schemes. You should ideally aim for a smaller proportion of investments in small and mid-cap funds which bring in high returns (along with high volatility) and balance them with large-cap funds which have stable returns (lower than small and mid-cap).
Final summary
A financial strategy for your child’s education is an absolute necessity, given the high educational inflation that is prevailing in the world today. The strategy should factor in your income, target corpus, investment horizon and risk appetite.
Starting early in terms of investments lowers the financial burden in the future and helps you in paving a path for your child’s dream career. There is no appropriate or right time to start investing for your child’s education because the right time is now.
Note – The past track record of a fund is no guaranty of its future performance. Mutual fund investments are subject to market risks and EducationFund does not endorse any fund over another in this blog.
Consult an expert advisor to get right plan for you