My PPF is going to mature. Where should I reinvest the money to save for my son's graduation?

I am 38. My PPF account is going to mature, and the amount will be around Rs 20 lakh. I have a 10-year-old son. How should I reinvest this PPF money? I want to invest it somewhere where I can get good returns and can take it out whenever it is needed for my son’s graduation. I do not have any other savings. I have some LIC policies and a term plan of Rs 1 crore. I want to invest in such a way that in case of any emergency, I should be able to withdraw some amount from the invested money. I started investing Rs 10,000 per month in mutual funds a year ago, and from this month increased the amount Rs 20,000 per month.

Prableen Bajpai, Founder FinFix® Research & Analytics replies, "Given your investment overview, the first thing you should do is set aside a sum equivalent to 12 months of expenses, including SIPs, premiums and EMIs. This will be your emergency fund and will ensure that you don’t have to dip into your other investments for contingencies. Additionally, keep some money handy for near-term expenses. Since monthly expenses and other details are not mentioned, keep aside Rs 5 lakh from the maturity amount of Rs 20 lakh. This Rs 5 lakh can be invested in fixed deposits and debt mutual funds. The remaining Rs 15 lakh can be invested for your son’s education using equity mutual funds. There is an eight-year horizon. Split the amount into three funds— large-cap index fund, aggressive hybrid equity fund, and an international index fund. You will be able to generate approximately Rs 27 lakh in the next seven years assuming a 9% CAGR. Start moving the accumulated sum into a debt fund closer to the goal. Assuming the same returns, the SIP of Rs 20,000 per month can generate around Rs 23 lakh during this period. However, if the SIPs are continued for the next 20 years, then you can build a retirement corpus of around Rs 1.72 crore assuming a 11% CAGR.

I am 26 and earn Rs 27,000 a month. I want to start investing Rs 1,000 a month in mutual funds through SIPs. Can you suggest some options?

Rushabh Desai, AMFI Registered Mutual Fund Distributor replies, "You can look at investing in Motilal Oswal Nifty 500 Index Fund and Motilal Oswal S&P 500 Index Fund. These funds invest in the top 500 Indian and US companies respectively as per their market capitalization. This will help your portfolio to diversify in the domestic and in the international (US) markets. You can invest in these funds in equal proportion. Also, you need to be clear about the purpose of your investment. Investing in equities is a long-term process, the minimum time horizon for an equity SIP investment should be around 6-7 years and the ideal time horizon is around 9-10 years and more. Since you are young you have ample time in hand for your investments to compound and if you don’t have too many monetary responsibilities, you can allocate around 20-25% of your earnings towards SIPs. If you decide to increase your SIP amount, along with the above-mentioned funds you can look at introducing two active funds from the flexi cap and focused categories. You can look at Canara Robeco Flexi Cap Fund and Mirae Asset Focused Fund. Please keep in mind to keep a buffer period of around a year or two at the end of your investment time horizon and redeem your investments during favourable market conditions to avoid any drastic hit on your returns."