3 years, Rs 5 lakh & a solid plan: Stock market-backed mutual fund investing for your child’s future

Investing for a child's future is a top priority for many parents. But what if there’s only a short window left to build a meaningful corpus? That’s the situation faced by Rajesh, who reached out to ET Now for guidance.

He wants to invest in mutual funds for his 15-year-old son to ensure a good financial cushion by the time he turns 18.

Rajesh has been considering children’s gift funds like HDFC Children’s Gift Fund, SBI Magnum Children's Benefit Fund, and ICICI Pru Child Care Fund.


However, Nisreen Mamaji, Founder of MoneyWorks Financial Services, suggests a more strategic and customized approach, given the short investment horizon.

Why Children's Gift Funds May Not Be Ideal

While children's gift funds are designed for long-term wealth accumulation, Nisreen points out that they may not be the best option for short-term investments.

"Rajesh has started a little late, so now there are only three years left for investment. I would recommend that he avoid children's gift funds, whether from HDFC, SBI, or ICICI Pru," she explains.

Instead, she suggests a DIY (Do-It-Yourself) portfolio approach, where Rajesh can select mutual funds that offer better flexibility, liquidity, and potential returns.

Expert-Recommended Investment Plan

For a three-year investment horizon, Nisreen recommends the following mutual fund allocation:

Nippon India Flexi Cap Fund – 40%

UTI Multi Asset Fund – 30%

HDFC Balanced Advantage Fund – 30%

This portfolio provides:

Growth Potential: Nippon India Flexi Cap Fund allows exposure to large-, mid-, and small-cap stocks, offering long-term growth opportunities.

Diversification: UTI Multi Asset Fund spreads risk across equity, debt, and gold, ensuring stability.

Dynamic Allocation: HDFC Balanced Advantage Fund adjusts equity and debt exposure based on market conditions, reducing volatility.

How Much Can Rajesh Expect in 3 Years?

Nisreen estimates that if Rajesh invests Rs 5 lakh, with an expected annualized return of 10%, the corpus could grow to approximately Rs 6.65 lakh in three years.

"This projection is based on historical market trends, but actual returns may vary. However, this approach gives Rajesh a clear idea of how much he can accumulate by the time his son turns 18," Nisreen adds.

Key Takeaways for Investors

Avoid bundled investment plans like children's gift funds or life insurance-linked investments, as they may have restrictions and higher costs.

With only three years left before his son turns 18, Rajesh's best strategy is to invest smartly in a well-diversified mutual fund portfolio rather than relying on traditional children's gift funds.

As Nisreen advises: "Stay away from any bundled plans, whether from life insurance companies or asset management firms, and instead, build a strategic, self-managed portfolio."

By making informed investment decisions, parents can create a solid financial foundation for their children’s higher education and future aspirations—ensuring that they step into adulthood with financial security.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)