Sponsoring children’ education and retirement are 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 retirement 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 investment portfolio that helps you reach the goal. 

Solutions galore

However, some mutual funds are straightaway offering goal-based funds – popularly known as children and retirement funds. HDFC Children’s Gift fund, ICICI Pru Child Care and Axis Children’s Gift fund are among the largest children funds. Among retirement funds, UTI Retirement Benefit Pension fund, Reliance Retirement fund and Tata Retirement Savings fund have significant assets. 

These funds are touted as one-stop-solution for meeting your specific financial goals. What are these funds? And is it advisable to invest in these goal-dedicated funds to achieve your financial goals? 

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

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. For instance, for conservative investors, savings plan of UTI Children’s Career Fund proposes a relatively lesser equity component (40-60%) in the portfolio whereas it is higher at 70-100% for its investment plan. Some others offer just one asset-allocation option like that HDFC Children’s Gift Fund and ICICI Prudential Childcare (See table). 

goal oriented funds

However, there are no unique features in these funds. At best, some offer a paltry personal accident insurance cover. 

Retirement funds offer similar portfolio options like that of children funds. While UTI Retirement Benefit Pension fund, Franklin India Pension plan and HDFC Retirement Savings fund are government-notified pension funds qualifying for Sec 80 C tax benefits (like that of ELSS) of the Income-tax Act, 1961, the newly launched ICICI Prudential Retirement Fund and Aditya Birla Sun Life Retirement Fund 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 a lock-in period of five years. You can withdraw earlier than usual only on attaining the retirement 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 the fund underperforms? In such circumstances, you will be forced to stay with the fund or pay a hefty exit load – 3% or more. 

Different strokes

Unlike other categories of equity funds (say large-cap equity funds), where the investment basket is clearly delineated, for children or retirement funds, 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 Pension Plan from 0-40%. Funds 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 funds – as you remain unsure of what proportion of your investment is going into equities or debt.

Mix and Match

Goal-based funds like children funds 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 debt funds in the proportion of your preference. In the process, you will not only diversify your bets but also stand a better chance of achieving your financial target. Check out advantages and disadvantages of mutual funds