Children's Day Alert: Unlock Your Child's Future! Expert Reveals Top Mutual Funds for Education Goals

Financial experts are urging parents to proactively plan for their children's future education expenses, especially as Children's Day nears. Nasser Salim, Managing Director of Flexi Capital, shared insights on CNBC-TV18, emphasizing the effectiveness of goal-based mutual funds. These funds are structured to systematically build a corpus for long-term needs like education or marriage, balancing growth with investment discipline. Salim pointed out that they are superior to traditional products because they aim to keep pace with inflation and the escalating costs of education.

He mentioned that children's mutual funds typically have a lock-in period of five years or until the child attains 18 years of age, whichever is earlier. Among the funds showcasing strong performance, Salim cited SBI Magnum Children’s Benefit Fund with approximately 34% annualized returns over the last five years, followed by ICICI Prudential Child Care Fund (around 20%) and HDFC Children’s Gift Fund (around 19%).

Salim also advised diversifying investments by combining these specialized funds with broader, diversified mutual funds such as those from DSP, HDFC, Parag Parikh, or Kotak, to enhance overall returns and mitigate concentration risk. He stressed the power of consistent Systematic Investment Plans (SIPs), noting that even small, regular investments can grow substantially over 10 to 15 years.

Key principles for parents include starting early to leverage the power of compounding, setting realistic financial goals that account for inflation, and regularly reviewing SIPs to stay on track. For new fund offers (NFOs), Salim cautioned against hype and low Net Asset Values (NAVs), advising investors to focus on the fund manager's track record, portfolio diversification, and strategic value.

Impact This news directly impacts Indian retail investors, particularly parents, by providing actionable advice and highlighting specific investment vehicles and their performance. It can lead to increased investment in the mutual fund sector, especially in children-focused and diversified equity funds, potentially boosting Assets Under Management (AUM) for various Asset Management Companies (AMCs). The advice on systematic planning and compounding aims to empower investors to meet long-term financial goals more effectively, contributing to financial literacy and market participation. Rating: 7/10

Difficult Terms:

Goal-based mutual funds: Mutual funds designed to help investors achieve specific financial objectives, such as education or retirement, by aligning investment strategies with the time horizon and risk tolerance for that goal.

Corpus: A sum of money accumulated for a specific purpose.

Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Lock-in periods: A specified period during which an investment cannot be sold or withdrawn.

Annualised returns: The average annual gain on an investment over a period longer than one year.

Diversified mutual funds: Funds that invest in a variety of assets across different sectors or asset classes to reduce risk.

Concentration risk: The risk associated with having too much of an investment in a single asset, sector, or geographic region.

SIP (Systematic Investment Plan): A method of investing a fixed amount of money at regular intervals, typically monthly, into mutual funds.

Compounding: The process where an investment's earnings begin to generate their own earnings over time, leading to exponential growth.

NFOs (New Fund Offers): The initial offering of units of a new mutual fund scheme to the public.

NAVs (Net Asset Value): The market value of a mutual fund's per-share assets. It is calculated by taking the total value of the fund's assets, subtracting its liabilities, and dividing by the number of outstanding shares.