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Top 10 Best Performing Childrens Fund


Explain Children Mutual Fund

What is Child mutual fund?

The funds which cover the goals such as child’s education, marriage and other future objectives are children mutual fund. These are the long-term mutual fund plans which fall under the solution-oriented mutual fund category. There are many child mutual fund plans in India from which you can choose the best according to returns and investment horizon.

Child mutual fund schemes does not follow any fixed asset allocation pattern, as they can invest across equity of large cap, mid cap and small cap companies & debt instrument as well. There are a number of child mutual fund plans which have a lock-in period of 5 years or until child attain majority, whichever is earlier.

Child gift plan or mutual funds aim to provide high returns in the long run so the investor can fulfill the education and marriage requirements of his/her child.

The asset allocation of Child Mutual Funds

Where child mutual funds invest?

Most of the child mutual funds in India have a different asset allocation depending on the duration of investing. Children mutual fund scheme returns also depend upon the asset allocation of these funds. They can be hybrid mutual funds or equity mutual funds.

  • Equity mutual funds: These solution-oriented mutual funds invest predominantly in the equity of the large, mid and small-cap companies so they can earn a high return in the long run. These funds are suggested to such investors who have at least 10-15 years of the investment horizon. Some of these funds are TATA Young Citizens Fund, SBI Magnum Children’s Benefit Fund, etc.
  • Hybrid Child Mutual Funds: The funds which have major asset allocation in either equity or debt depending on the nature of fund are hybrid child mutual funds. Those funds which have 60% allocation in equity and the rest in debt are hybrid equity child mutual funds. Some of these funds are ICICI Prudential Child Care Fund, HDFC Children’s Gift Fund, etc. Investors who have 5-7 years of investment horizon should invest in these funds.
  • Debt-oriented child Mutual Funds: There are some child funds which predominantly invest in debt instrument therefore the best option for conservative investors with 3-5 years of the investment horizon. Some of these funds are UTI Children’s Career Plan, Axis Children’s Gift Fund, etc.

Benefits of Children Mutual Funds:

  • Moderate to high risk and return: These funds have asset allocation in both equity and debt securities, so the funds may offer moderate to high returns depending on the risk level of investors.
  • Long term investment horizon: The investors investing in these funds should have at least 10-15 years of investment horizon if they are able to take high risk. However, for a moderate risk-taking investor, the investment horizon should be between 5-7 years.
  • Tax: Most of the mutual fund schemes are tax-efficient. Investors who are investing in equity allocation child funds need to pay long-term capital gain (LTCG) @ 10% if their profit exceeds Rs 1 Lac. But in the debt-oriented children fund, the debt LTCG taxation implications will be levied. Besides, parents can also avail the benefit under section 80C with the maximum deduction of 1.50 Lac for the investment made.

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FAQs

  1. 1. Who can invest in Children education mutual fund?

    Only the parents of a minor child are eligible to invest in the child education mutual fund schemes. Any guardian of the child is also allowed to invest at the name of a minor child. One can invest in child mutual fund plans through SIP or lumpsum mode of investment. For making an investment, you can set the target corpus and time. Once you reach the target amount, you can stop investment and let it grow with time. You can also use the calculator provided by AMCs to find out the amount that you have to invest. By this, you can choose the right fund as per your requirements.

     

     

  2. 2. Which are the best child mutual funds in India?

    • SBI Magnum Children’s Benefit Fund
    • HDFC Children’s Gift Fund
    • Axis Children’s Gift Fund
    • UTI Children’s Career Plan

     

     

  3. 3. How to choose the best child mutual fund scheme?

    People mostly struggle in selecting the best child mutual fund as they did not know which one will fit their goals. At the initial step, they have to set the target corpus and decide their risk appetite and investment horizon, so they can reach the ultimate goal of child education fund on time. If a person has a high-risk tolerance and long investment horizon, then they can invest in equity-oriented. But if a person has a moderate risk-taking appetite, they can invest in hybrid child gift plans, so they will get moderate returns over a period of 5-7 years.

    Besides this, you also need to look after the AUM, long-term returns and investment strategy of the fund so that you can decide how it will work in the long run.

     

     


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Disclaimer: We personally suggest you to start SIP, so you can average your NAV. The above list is not a recommendation of funds, nor does it claim to the only correct way to rank funds. Please check the complete risk document of Mutual Funds and their current exposure to market before doing your investment.

Last updated on 10-Sep-21


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