Vivek Jugran, 30, was working in a fast moving consumer goods company for the past seven years. However, his career was not going anywhere. His prospects were getting stifled because he did not have a Master’s degree in Business Administration, the coveted MBA.
Further studies seemed ruled out because he has family responsibilities. His father had recently retired. His mother was a housewife and his only sister was still graduating. He needed to create a corpus, which in addition to his father’s pension would take care of the family’s expenses.
Jugran sought help from a planner. The advice: Delay further studies by three to five years. Create a corpus. If possible, take a part-time job to create the kitty faster.
But, another question was — in what kind of instruments should the money be invested so that it earned decent returns? While safety was of prime importance, some returns were also required.
Debt-oriented hybrid funds was the answer. Hemant Rustagi, chief executive officer, Wiseinvest Advisors, recommended the option, saying, “It will help protect capital”. These funds allocate at least 60 per cent in debt and the remaining in equity (to benefit from upsides in equity markets).
Keeping a three-year horizon in mind, Jugran invested in hybrid funds through systematic investment plans (SIPs) of mutual funds. The result: He was able to save Rs 6 lakh over three years. He invested the lumpsum of Rs 6 lakh in a monthly income plan (MIP) of a mutual fund for regular income. MIPs are hybrid investment avenues that invest a minor portion (15-25 per cent) in equities and the balance in debt. These help maintain a low-risk portfolio that generates regular and stable returns.
And, though he took an education loan of Rs 10 lakh for his MBA, this corpus helped him complete his education. As a hedge for the loan, he purchased a term policy of Rs 10 lakh for an annual premium of Rs 4,000.
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There are many others like Jugran who start working but realise soon that further education will be required for professional growth. If you are starting late and have additional responsibilities, the best thing is to create a corpus, along with a life insurance product. The former will ensure assured income, whereas the latter will act as a hedge against the risk arising out of untimely death.
However, if you are, say, 22 and have already set your goals on higher education, things can be simpler. And, you can take the risk as well. If you want to work for the first few years (three) before going for further studies, a part of the corpus can be created through equities.
For example, if you are saving 20,000 a month, invest Rs 5,000 in two equity diversified funds. The rest can go into hybrid funds. However, after completing two years or two-and-half years, move the equity portion to debt funds. This will ensure that the capital appreciation is protected.
However, one needs to be a bit careful about the equity portion. If the market is going through bad times, equity may not be a great option. Take, Krishna Limaye, 32. He has been working towards saving for his higher studies for over five years. He has a wife and a four-year old daughter.
With a salary of Rs 80,000 and expenses of Rs 30,000 a month, Limaye was able to save around Rs 8 lakh, with another Rs 2 lakh in bank fixed deposits. Though he has gone for an education loan for his Indian School of Business course, he feels safe that his family’s requirements will be taken care of. “In such cases, one can easily invest by way of an SIP into an equity diversified fund,” said Rego. A time span of five to six years is apt for equities.