Flip Your Kid's Dream: Prime 5 Mutual Funds

Children have the right to dream about their future. It can be anything. Ranging from studying in the IIT or IIM or going abroad to explore the variety of courses offered in different fields like social sciences and humanities, marine sciences, fine arts, and the list continues. And every parent wants to fulfil the dream of their child, and for that, they leave no stone unturned. One of the ways to prepare for this is by investing in mutual funds. Mutual funds offer a variety of benefits like capital appreciation over the long term, diversification, professional management of the funds, etc. In this blog post, we will first discuss the right approach to prepare financially for your child’s dreams and then some of the top mutual funds that can help you turn your child’s dreams into reality. We thought to curate a list of top 5 mutual funds that are sure to be the best gift your children can have for their future.

How to start saving and investing for your child’s dreams? What is the right approach?

The first thing parents need to do is estimate the amount they would require in the future and how much time they have to reach that amount. To estimate the future amount, you can consider how much it costs today, and based on that, you can compound that amount using the inflation rate for the period you have in your hand to incur the expenditure.  This is not as difficult as it sounds with the help of the education cost calculator.  

Once you estimate the amount required and decide the period you have in hand, the next step is understanding how much risk you can take to get to that amount. The longer the time horizon, the greater the risk appetite and vice versa. For example, if your child is five years old and you want to build a corpus for their graduation, you have roughly 13-14 years in your hand wherein you can take the higher risk during the initial years. So, you can consider investing in high-risk equity funds initially. Then as you get closer to your goal, your risk-taking ability reduces, and you need to rebalance your portfolio to shift to lesser risky funds like hybrid or debt-oriented funds.

After understanding the right approach, let us now discuss the top 5 mutual funds you can consider to fulfil your child’s dream:  

1. SBI Small Cap Fund

SBI Small Cap Fund is an open-ended equity fund that invests in small-cap companies. Small-cap companies have the highest growth potential in the long run. Therefore, mutual funds investing in small-cap companies provide the highest potential for capital appreciation over the long term. Also, the volatility in the small-cap funds is reduced significantly as the time horizon increases. SBI Small Cap Fund is one of the top-performing small-cap funds that can help you to fulfil your child’s dream. The fund has performed consistently over the long run. 

                                           Note: Data as on 06th July 2023                         Source: SBI Mutual Fund

2. Axis Mid Cap Fund

Mid-cap companies are the ones which are established and yet have strong growth potential. Like small-cap funds, mid-cap funds tend to outperform large-cap funds over the long term. And one such consistent performer in the mid-cap mutual fund category is the Axis Mid-Cap Fund. 

                                           Note: Data as on 06th July 2023                         Source: Axis Mutual Fund

3. Canara Robeco Flexi Cap Fund

Flexi-cap funds are the ones which provide the advantage of having exposure to companies across all the market caps. Since the fund manager can invest across companies of all market caps, the fund manager can rotate the funds as required. Canara Robeco Flexi Cap Fund is one of the top-performing funds in the flexi cap category.

                                           Note: Data as on 06th July 2023                 Source: Canara Robeco Mutual Fund

4. HDFC Focused 30 Fund

Focused funds are the ones wherein the fund manager can invest in the companies across different market caps with a maximum of 30 companies. These funds are suitable for investors looking to invest in the long term with an understanding of high risk. HDFC Focused 30 Fund is the top performer in the focused category.

                                           Note: Data as on 06th July 2023     Source: HDFC Mutual Fund, Value Research

5. ICICI Prudential Balanced Advantage Fund

Balanced advantage funds are hybrid funds that invest in debt and equity. ICICI Prudential Balanced Advantage Fund is the top-performing fund in the balanced advantage category providing the advantage of both capital protection and appreciation. This fund is suitable for realigning your portfolio from a high-risk equity to a moderate-risk hybrid fund.

                                           Note: Data as on 06th July 2023     Source: HDFC Mutual Fund, Value Research

Conclusion:

Investing in mutual funds can effectively secure your child’s future and turn their dreams into reality. These top five mutual funds in India offer a combination of capital appreciation and risk management. However, it is important to monitor the portfolio and reallocate the funds from time to time to manage the risk. Remember, a well-planned investment today can lay a solid foundation for your child’s dreams tomorrow.