Delories Jones, senior vice-president of sales and marketing at JN Fund Managers, says using mutual funds as a long-term investment strategy for education and retirement is a wise approach for any investor.

The veteran investment professional informed that this can be an option if there is careful consideration of one’s financial goals, risk tolerance and investment horizon.

As it relates to education, she said, investing in mutual funds can help a potential investor accumulate funds for their children’s education expenses. She noted that an early start is important as the power of compounding works in one’s favour when there is early investment.

“The longer your investment horizon, the more time your money has to grow,” she pointed out.

Jones, however, explained that the investor could consider a mix of mutual funds that align with one’s risk tolerance and investment horizon. “Since education expenses might have a fixed date, it’s important to balance risk and potential return,” she advised.

She recommends regular contributions through an automatic investment plan (AIP) to contribute a fixed amount regularly. “This helps you benefit from dollar-cost averaging, potentially reducing the impact of market volatility,” she said.

She advised investors to periodically review their investment strategy to ensure it’s on track to meet their education funding goals. “As the education date approaches, you might want to shift to more conservative investments to protect your capital,” she said.

Turning to retirement planning, the senior vice-president of sales and marketing said that mutual funds can also be an effective tool for building a retirement nest egg.

“Determine an appropriate asset allocation that considers your risk tolerance, time to retirement, and desired retirement lifestyle. A mix of stocks, bonds, and potentially other assets can help balance risk and return,” she explained.

She advised investors to look for tax-efficient mutual funds, such as index funds or funds with low turnovers, to minimize capital gains taxes on retirement accounts.

“Contribute consistently to retirement accounts or an individual retirement account. Take advantage of any employer matching your contributions in your company’s retirement plan,” she added.

Jones suggested that investors periodically rebalance their portfolios to maintain their desired asset allocation. “As you get closer to retirement, consider gradually shifting to a more conservative allocation to protect your savings,” she cautioned.

Commenting on retirement planning, she suggested establishing a withdrawal strategy that ensures savings last throughout the retirement years. This, she said, might involve gradually selling stocks and managing withdrawals to balance one’s income needs with market conditions.

“Remember, both education funding and retirement planning are long-term endeavours. Be prepared for market fluctuations and avoid making impulsive decisions based on short-term market movements,” said Jones.

She advised investors to consult with a financial advisor to develop a customised investment strategy that aligns with their specific goals, risk tolerance and financial situation. Additionally, she said persons should stay informed about their chosen mutual funds’ performance, fees, and any changes in the investment strategy, and closely review the monthly portfolio statements.