Are you planning to invest in mutual fund for your children? Read on to learn about the steps and precautions you should take before making the investment.You must have read that equity and balanced funds are the best way for long term investments. But the main problem arises when one has to select the best mutual funds for
investment for the future of their kids.
Parents want the best for their children. They do not just think about the present, but also about their future and this they do by investing money on their behalf in funds that would give them good returns.
Mutual funds are being talked about a lot in the recent past because they offer higher rate of interest than usual saving accounts. However, the main point of worry is that not all mutual funds are suitable and you need to make the right choice so that your hard earned
money gets invested in the right place.
Steps to Buy Mutual Funds for Children
Here are some steps that you must follow to take
financial decisions like buying mutual funds for your children.
Step 1 - Determine the Reason
Before you start investigating things it is important you know exactly why you want to make the investment. Determine the investment objectives and also make sure how much amount would you like to put in to accomplish them. You will have to calculate the time period for which you wish to invest in because if your child would need the money within 5 years, you will have to look into different options.
Step 2 - Understand the Mutual Funds
There is minimum amount of money fixed for investing in mutual funds and so you will have to make sure you have that much of money in spare. However, if you go for Systematic Investment Plan you can invest some amount every month which you can also get deducted directly from your account every month so that you do not miss any.
Step 3 - Research
Once you have covered steps 1 and 2, this step becomes very important and you can use
internet for researching kid-friendly mutual funds. Try to gather information from reliable sources and visit legitimate websites of the reliable companies to gather details.
Step 4 - Consider other Investment Options
Do not fix your mind to invest only in mutual funds. Depending on the age and stage of your child, you can find out better investment options than mutual funds provided you research well.
Step 5 - Gather Details About the Company and the Broker
The track record of the broker as well as the company in which you are planning to invest is very important. Invest your money in the company that offers long term plan and has excellent management. Spend enough time investigating different companies of your area.
Step 6 - Invest in Low Risk Mutual Funds
Experts are of the opinion that choosing a highly diversified mutual fund is better because they carry low risk. This is because your money gets invested in different securities.
Step 7 - Invest in Mutual Funds that Requires Negligible Involvement
It is advisable to select the mutual funds that do not require you to keep a regular watch on them. You can talk to your broker about this and look out for such options.
Step 8 - Mind the Exit Load
Since mutual funds are long term investment plans, most of them levy high penalty for early redemption. Check out this option because some of the mutual funds for kids levy penalty even if the money is redeemed before 7 years.
Fund houses or the companies have customized their schemes so that they fit in the needs at various stages of child’s life. In addition to this some of them are tax efficient also which makes them ideal for long term investment.
Is it safe to invest in mutual funds? Do mutual funds provide good returns? Is it good to invest in mutual funds for children? Discuss here. 
