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'Use MF money or loan for my child's education?'

Last updated on: March 19, 2024 12:31 IST
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Do you have financial planning queries?
You can ask rediffGURU Colonel Sanjeev Govila (retd) your questions HERE.

Colonel Sanjeev Govila (retd) is the founder of Hum Fauji Initiatives (external link), a financial planning company dedicated to the armed forces and their families.

He has over 12 years of experience in financial planning and is a SEBI certified registered investment advisor; he is also accredited with AMFI and IRDA.

Illustrations: Dominic Xavier/

Monica: Hi Sir, I'm Monica. My target is Rs 1 crore in next 6 years, investing Rs 5,000 in Nippon Small Cap Fund and Rs 5,000 in Parag Parekh Flexi Cap Fund, Rs 3,000 in Canara Robeco Bluechip Fund. Could you suggest any changes and improvements here? Thanks.

You have invested in equity-oriented funds which need a long-term investment horizon to become stable and deliver good returns as they face more volatility in comparison to the debt category.

Your accumulation expectations are unrealistic.

You cannot accumulate Rs 1 crore by investing Rs 13,000 a month for six years -- you would need to invest about Rs 95,000 per month.


Krishna: I wish to invest Rs 25,000 in mutual funds. I am ready to take high risk. Can you suggest me a mutual fund portfolio?

I have no idea what risk means to you. It will be better to consult a good financial advisor and get a portfolio made after getting your risk profile done.

In general, a higher risk portfolio works out in not less than a five year time horizon. You should be prepared for that kind of investing period.


Anonymous: I am 43. Got divorced recently. Lost all my savings in PF and gratuity.
My NTH is approximately 2 lakh. I have 17 years to my retirement. How much should I invest each month to have a decent corpus?
In my terms, any one today who has a corpus of about Rs 2.5 to Rs 3 cr is decent. Likewise, after 17 years, what will be a decent amount?

As per inputs received from you, you will require an amount of Rs 3 cr for your retirement after 17 years, considering the current inflation rate of 6 per cent and the portfolio returns of 12 per cent.

Please find the below data for your reference:

• Investment time horizon: 17 years

• Corpus required at age 60: Rs 3,00,00,000 (today's value)

• Inflated value at age 60: Rs 8,10,00,000 (approx)

• Amount required today (one time): Rs 1,20,00,000 (approx)

• Monthly amount required today: Rs 1,25,000 (monthly SIP)

For proper financial planning, we request you to connect with your financial planner.


Amit: Hi, I am investing Rs 3.5 lakh every month in small and mid-cap SIP for the last two years.
My son will be going to study abroad.
Should I fund his education from the MF or should I take a student loan and not touch the MF?

Deciding between using your mutual fund investments or a student loan for your son's education abroad requires more details like estimated education cost, living expenses, travel expenses, etc.

By considering your inputs, here are some pros and cons:

Using portfolio for education

  • Pros: As you have been investing in a mutual fund for the last two years, assume that your portfolio is generating potentially higher returns compared to loan interest rates and in the long-term horizon (5-7 years) your portfolio becomes stabilised and the compounding helps to create a good corpus for your future goals.

  • Cons: If you withdraw the portfolio now, it will affect the compounding and the generated capital gain is taxable and it may also incur the exit load. In the short-term horizon, fluctuating markets might impact the value of the portfolio, potentially falling short of education costs.

Taking education loan

Pros: Lower interest rates are set off with the portfolio returns and it also provides suitable repayment options. It offers benefits like tax deductions.

Cons: Add the financial burden on you, if you repay the loan. If your son repays the loan, it becomes a debt for him after the completion of education but it also creates a sense of responsibility for your son and he experiences how to manage his finances.

We have explained to you the pros and cons of taking an education loan or using a portfolio for the same.

To decide the same please calculate the estimated cost of education and also consider the portfolio return and education loan interest rate.


Shiva: Hello I'm Shiva. I'm 37 yrs old and getting Rs 1.25 lakhs per month.
I invest Rs 35,000 in EPF and VPF, Rs 25,000 in PPF and wife's PPF, Rs 5,000 in NPS. Rs 10,000 in new start-ups.
Is my portfolio good and how can I change my portfolio for secured and higher returns in a short time?

• Investing is a long-term game, so it can be risky to focus on short-term returns.

• It's great that you're consistently investing around 40 per cent of your income, especially considering that you're using different investment avenues.

• Your age and income can lead you to consider increasing your exposure to equity-based investments if you focus on debt-heavy instruments.

• Consider diversifying your portfolio beyond PPF and NPS by exploring mutual funds (equity and debt) instead of just limited diversification.

  • You can ask rediffGURU Colonel Sanjeev Govila (retd) your questions HERE.

Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this QnA or an attempt to influence the opinion or behaviour of the investors/recipients.

Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

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