When should an investor with Rs 1.2 crore in mutual funds, 90% in equity, de-risk for a Rs 30 lakh education goal?

Are you holding over Rs 1.2 crore in mutual funds, with 90% invested in equity, and wondering when to shift towards safer instruments to meet a Rs 30 lakh financial goal over the next three years? Here is some guidance, as reported by ET Wealth.

While shifting money out of equity may mean missing out on some upside if markets continue to rise, remaining fully invested exposes you to the risk of capital erosion just when the money is needed, according to Pankaj Mathpal, founder of Optima Money Managers.

Mathpal said that since a child’s education is a non-negotiable goal, capital preservation should take priority over maximising returns.

Assuming the education expenses will be spread over three years in roughly equal instalments, Mathpal recommends allocating Rs 10 lakh to an arbitrage fund for the first year’s requirement, Rs 10 lakh to an equity savings fund for the second year, and Rs 10 lakh to a dynamic asset allocation fund for the third year.

Hybrid funds retain some equity exposure, allowing investors to participate in potential market gains while reducing downside risk compared with pure equity funds, Mathpal said.

This staggered approach protects the money earmarked for the child’s education while allowing the rest of the portfolio to remain invested for long-term wealth creation, Mathpal said.