HDFC and UTI already have equity-oriented children-focused schemes that come with a longer track-record
Planning your child’s financial future may rank high on your family’s agenda. Investing in various avenues to secure the education and marriage costs of your child would be a priority for many of you. In this light, as an addition to the list of children-specific mutual funds comes the SBI Magnum Children’s Benefit Fund (Investment Plan). The new fund offer opens on September 8 and closes on September 22. Is there anything unique about the scheme and is it worth investing in?The scheme
SBI Magnum Children’s Benefit Fund (Investment Plan) would look to invest at least 65 per cent in domestic stocks. The remaining portion will get allocated to international equities (maximum up to 35 per cent) and gold exchange traded funds (up to 20 per cent).
Your funds are locked-in for five years, or till the child turns 18, whichever is earlier. You can invest only in the minor’s name from the minor’s bank account or from a joint account with the minor.
The fund already has an existing Savings Plan, which invests at least 75 percent in fixed income securities. That plan was launched in 2002.
Financial planners and advisors say that children’s funds can help a certain set of investors who may otherwise find it difficult to stick to a plan. “Some investors are not good at following a goal-oriented plan, and are susceptible to impulsive spending,” says Amol Joshi, founder of Plan Rupee Investment Services.
“As the investment in such funds has to be made in the name of the child, the parents are more likely to stay invested,” says Ritesh Sheth, co-founder of Tejas Consultancy.
SBI MF’s track record in equity and debt fund management inspires confidence. R Srinivasan, head-equity, SBI MF, says that the equity portion of the fund will be run like a multi-cap scheme.
Since the scheme’s debt component would be restricted to just 35 percent, it would be managed conservatively, says Dinesh Ahuja, debt fund manager for the fund. “We will stick to high-quality AAA-rated names, and if there is a potential to generate alpha in AA or AA-plus rated corporate bonds, we would consider high-quality names in that segment,” he says.What doesn’t work
A new fund’s biggest drawback is the lack of history. “An existing track-record helps an investor gauge how the fund has performed across various market cycles,” Joshi says.
Although SBI Magnum Children’s Benefit Fund (Savings Plan) has a good track record, we still need to see how the newly-launched Investment Plan would do.
Although investments made for your children’s future need to be for the long term, a lock-in prevents you from existing the scheme, if the performance is poor.
Besides, fund houses such as HDFC and UTI already have equity-oriented children-focused schemes that come with a longer track-record.Moneycontrol’s takeYou could just as well plan for your child’s future through an existing and even an open-ended fund that comes with a track record.SBI’s fund will now have two variants – equity and debt-oriented – just like most other children-focused mutual fund schemes. It also aims to benefit from investing across asset classes; a strategy that has proved beneficial in recent times. Of course, the scheme is meant for a child’s financial planning and comes with a five year lock-in. Investors can give the new scheme a miss. Instead, the fund house’s other existing open-ended schemes may help reach your financial goals.