How should I invest Rs 20,000 in mutual fund SIPs to save for my daughter’s higher education? (2024)

FAQs

How should I invest Rs 20,000 in mutual fund SIPs to save for my daughter’s higher education? ›

In this context, I recommend dividing your Rs 20,000 investment into 5 SIPs of Rs. 4,000 each.

A monthly SIP of Rs 20,000 in Quant Small Cap Fund would have grown to Rs 1.04 crore in the last 10 years. The scheme gave an XIRR of 27.73% in the same period. Quant ELSS Tax Saver Fund would have turned a monthly SIP of Rs 20,000 into Rs 95.38 lakh with an XIRR of 26.04% in the last 10 years.

Investing 20000 every month involves strategic planning and allocation across various financial instruments. Consider investing in Chit Funds for stable returns, Equity for long-term growth potential, and SIPs in unit trusts for regular investments.

However, 529 plans trump mutual funds in the area of potential tax advantages. Mutual funds offer no special tax benefit if they're used to save for college or K-12 expenses. You'll pay income tax every year on the income earned by your fund, even if that income is reinvested.

Value of INR 20,000 per Month in SIP

If an investor invests INR 20,000 per month for a period of 5 years, he will be able to earn INR 17 lakh as the overall income generated from SIP. The total investment in the tenure of 5 years will be only INR 12 lakh.

Example of Using an SIP Calculator

You aim to have ₹20 lakhs in 5 years and can invest ₹30,000 every month. With an expected annual return of 12%, you plug these numbers into the mutual fund SIP calculator. This means your investment has grown significantly, reaching a maturity value of ₹24.3 lakhs.

Which bank is best for SIP? ›

In this manner, SIPs help you ride out short-term market volatility and benefit from the effect of compounding over the long term. That said, SIPs do not offer guaranteed returns. A SIP can go into losses based on the market performance.

Synopsis. Quant Small Cap Fund topped the list with 46.70% SIP returns. Nippon India Small Cap Fund offered 37.92% returns. Quant Mid Cap Fund, Bank of India Small Cap Fund, and Quant ELSS Tax Saver Fund also performed well with returns of 34.45%, 34.44%, and 34.05% respectively.

However, a common guideline is to invest around 20-30% of your monthly income in various investments, including SIPs. A commonly recommended approach is the 50/30/20 rule: 50% for needs (rent, groceries, utilities) 30% for wants (entertainment, dining out)

A dedicated 529 Savings Plan is one of the most tax-beneficial and efficient ways to build a college fund for baby. A 529 plan provides tax-deferred growth, allowing your investments to grow without having to pay taxes on them.

In general terms, your 529 investment strategy should have a higher proportion of assets allocated to high-risk investments like stocks (equity) when your child is younger, and gradually shift to an emphasis on low-risk asset allocation as they age and get closer to college.

However, mutual fund investments can be made through a custodial account opened in a minor's name and overseen by a guardian. This custodian holds the decision-making power of the account until the child reaches legal age, typically 18 or 21.