How children-oriented mutual fund schemes performed in last 1-year & top 5 winners
13 December, 2024
Synopsis
- Children's mutual funds are solution-oriented funds designed for long-term savings. They have a five-year lock-in period or until the child turns eighteen.
- These funds help in achieving long-term objectives such as a child's education or marriage.
- With options for every investment objective and features like top-up SIP, children's funds can potentially increase the benefits of compounding over time.
As a parent, you want to give your child the best start in life with good planning for their financial future. One way to do this is through children's mutual funds, which are investment options designed specifically for long-term savings for children.
These funds pool the money of crores of parents and invest it in diverse financial instruments. The idea is to grow this money over time and give you enough returns to help you with funds for important events in your child's life—education, skill development, and marriage, among others. Let us discuss children’s mutual funds with their benefits in detail.
What are Children's Mutual Funds?
Children’s funds are solution-oriented funds with a minimum lock-in period of 5 years or until the child in whose name the fund is invested achieves majority age. These funds can be equity-oriented, debt-oriented, or hybrid funds.
If you aim for higher returns with high risk, then you can go with equity-oriented children’s funds. If you are risk averse, then you can go with debt-oriented ones and for the balance of both risk and return, choose from hybrid types. Currently, ten children’s funds are available in the market, with mostly marked as very high-risk plans.
Why to Invest in Children’s Funds?
With rising inflation, it is essential to start investing small amounts from today for your child so that his important life events do not put you under strain. With children-oriented funds, these objectives can be fulfilled, and the fund manager is the one who works on your money to a stress-free future.
Tax Benefits in Old Regime
The parents will get several tax benefits from these funds in the old tax regime. Under Section 80C, an investment of up to ₹1.5 lakh is deducted from your taxable income in a financial year. Also, you are eligible for a ₹1,500 tax relief per minor kid under Section 10(32) of the Income Tax Act, 1961. If the minor earns more than ₹1,500, the extra money will be combined with the parent's earnings.
Fulfils Long Term Objectives
With the close-ended theme and quoted as the way to a child’s secured future, rules and emotional sentiments keep investors invested in these funds for a long time. Also, the fund manager is free to make decisions that reap long-term benefits without fearing early redemptions.
Fund for Every Time Horizon
If your objective is long-term, say more than ten years, then you can invest in equity or aggressive-based funds. The market volatility gets subdued in the long run, and the returns will exponentially grow. If your child’s marriage is in a few years, then you can invest in little conservative plans to lessen the risk with the growth potential.
Top-Up SIP Can Help
In the long run, your income increases, so why shouldn’t your investment also increase? This mantra is applied perfectly to children’s funds with top-up SIP, allowing you to increase the instalment amount in set intervals. This will accelerate the final corpus, and you might achieve your aim faster.
Performance of Children Oriented Mutual Funds 2024
Children-oriented funds are not the only way to invest for your child, and you can consider creating your portfolio with different types of funds. It all depends on your expertise in choosing the right fund, risk appetite and time horizon. Well, the HDFC Bank SmartWealth App makes your task easy by providing you with readymade portfolios for your different objectives.
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