Is it a good idea to invest in child-oriented mutual funds this children's day?1 min read . Updated: 24 Oct 2020, 02:29 PM IST
If you haven't started yet, you can start investing for your child this children's day. You can start planning now.
If you haven't started yet, you can start investing for your child this children's day. Saving for child's higher education tops the lists of goals of most women in our country, shows a survey by Scripbox. Most reader queries that we receive have two common goals--retirement and saving for child. No doubt, the biggest mutual fund houses offer two kinds of goal-oriented schemes-- for retirement and for child specific goals. Here we will discuss only about child- specific mutual funds, their pros and cons. Do you actually need them?
Mutual fund advisors do not agree much. They believe while these schemes are positioned as solution-oriented schemes by the definition of Sebi, they do not offer anything special.
"Child-oriented mutual funds do not offer anything special other than the fact they have to be in the minor’s name and have a lock-in of five years, or till the child turns 18. These two features can, to some extent, discourage any impulsive decision to exit a scheme—which is good for any equity-oriented investment," says Prableen Bajpai, founder & managing partner, Finfix Research & Analytics.
Sebi defines a Solution-oriented children's fund as an open-ended fund for investment for children having a lock-in for atleast 5 years or till the child attains age of majority, whichever is earlier.
SBI Mutual Fund, Tata MF, UTI, Axis, HDFC Mutual Fund and most other big mutual fund houses offer child-specific mutual funds. These funds are run as hybrid funds with both equity and debt allocation. Conservative investors may also choose a higher allocation to debt portion in the portfolio of a scheme.
Mutual fund advisors believe such a portfolio can be otherwise also achieved by investing in other good equity and debt schemes depending on the time in hand and risk profile of the parent who is investing for his or her child.
"If someone is looking to invest for their child, that can still be done in their own name or the child’s name in any of the existing good open-ended mutual fund schemes," says Bajpai.
Just that the parent should be focused enough not to get shaken by the short term volatility in returns. If not, you can also take help of an advisor or a wealth manager to help you investing on the best manner for your child.