Sponsoring children’ education andare important financial goals. To achieve it, you should arrive at a financial target and the time-frame you will need it in. For instance, Rs 2 crore of nest egg by the time you turn 65 years. Or Rs 50 lakh by the time your child turns 18. Later, you work backwards and save enough to build an that helps you reach the goal.
However, some mutual funds are straightaway offering goal-based– popularly known as children and . HDFC Children’s Gift , ICICI Pru Child Care and Axis Children’s Gift are among the largest children . Among , UTI Benefit , Reliance and Tata have significant .
These meeting your specific financial goals. What are these ? And is it advisable to invest in these goal-dedicated to achieve your financial goals?are touted as one-stop-solution for
Read further as we give you a lowdown.
These funds are essentially equity or debt-based funds. They give one or more asset-allocation options (equity-debt combination) based on risk-taking appetite of investors.
No Unique Features
Theseare essentially equity or debt-based . They give one or more options (equity-debt combination) based on risk-taking appetite of investors. For instance, for conservative investors, savings plan of UTI Children’s Career proposes a relatively lesser equity component (40-60%) in the whereas it is higher at 70-100% for its investment plan. Some others offer just one option like that HDFC Children’s Gift and ICICI Prudential Childcare (See table).
However, there are no unique features in these. At best, some offer a paltry personal accident insurance cover.
offer similar options like that of children . While UTI Benefit , Franklin India plan and HDFC are government-notified qualifying for Sec 80 C tax benefits (like that of ) of the Income-tax Act, 1961, the newly launched ICICI Prudential and Aditya Birla Sun Life don’t qualify for such tax benefits. Under Section 80C, tax deductions up to Rs 1.5 lakh is available for select investments in a single financial year.
Also, there is aof five years. You can withdraw earlier than usual only on attaining the age (60 years) or after your child turns 18.
While lock-in is useful for trigger-happy investors, it might turn out to be a costly affair. What if theunderperforms? In such circumstances, you will be forced to stay with the or pay a hefty exit load – 3% or more.
Unlike other categories of(say large-cap ), where the investment basket is clearly delineated, for children or , investment options are wide open (See Table). For instance, the equity component for UTI CCF investment plan can be anywhere from 70-100% and for Franklin India Plan from 0-40%. can easily take a higher risk than their peers in their quest for higher returns.
Moreover, there are higher chances of you moving away from your targeted asset allocation strategy by investing in these – as you remain unsure of what proportion of your investment is going into equities or debt.
Mix and Match
Goal-based advantages and disadvantages of mutual fundslike children are essentially an emotional sales pitch. Don’t fall for it. Investing is simple. You can easily mix and match and invest in a combination of best-performing equity and in the proportion of your preference. In the process, you will not only your bets but also stand a better chance of achieving your financial target. Check out