Should I invest directly in US index funds to save for my child's US education to protect from rupee depreciation?

Investing directly in US is a great way to reduce your monthly investment burden by hedging against the historical 4-5% per-year rupee depreciation. When you invest in USD denominated assets like a US ETFs, you align the currency of your investments with the currency of your future goals.

Also, even other-wise, given US is 65% of the world stock market index, there is no reason you should restrict your investments to India just because you were born in India.

The current college cost of Rs 2.5cr (~$250K) will be ~$400K in 10 years time (assuming 5% US inflation).. now if the same investment is kept in Indian funds and assuming 4-5% annual rupee depreciation.. in Indian rupee terms you will need ~Rs6.3cr (equivalent to $400K in 10 years).

If you invest in Rupee Funds and expect a 12% return with your Rs 50 Lakhs baseline, you would need a monthly SIP of about Rs 2.1 Lakhs for next 10 years to get to a corpus of Rs 6.3cr. But if you invest directly in US index funds, even with a more conservative 10% expected return, the math changes drastically. Because you are eliminating the currency depreciation, your required SIP drops to about Rs 1.3-Rs1.5 Lakhs/m.

This currency hedge is one of the most compelling reasons to build your education corpus in the same currency you will eventually spend it in. It gives you big financial flexibility and significantly lowers the monthly cash flow pressure on your current salary.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.