Child Plans of Mutual Funds are the answer to secure your kid’s financial future
Every parent aspires to offer the best to their children — sound education, a decent lifestyle and most importantly, adequate financial security for them to pursue their dreams. But in order to fulfil these desires, it is necessary that planning and regular investments are done early on. And what better than Mutual Funds to achieve these objectives?
What are Mutual Funds Plans for Children?
Mutual Funds Plans for children are the mutual fund schemes specially designed keeping in the mind the long term financial needs of a child.
How do Mutual Funds Plans for Children Work?
They invest proportionately in both equity and debt instruments to maintain a balance between growth and regular income, depending on the scheme. These are mostly hybrid funds that seeks to generate income by investing in debt, money market instruments and equity and equity related securities.
They are ideal for investors who have a long-term investment horizon. With the returns being inflation adjusted in the long run, the funds are able to beat the soaring higher education costs and other expenses and deliver effectively on their objective.
Such schemes usually invest up to 75% of their corpus in fixed income securities, money market instruments, securitized debt and cash, with G-Sec and corporate securities comprising a major part of the debt component. The balance of up to 25% is invested in equity which seeks to provide potential capital appreciation.
Since investing for child’s future is considered a long-term investment, most of these schemes come with a high exit load to discourage early redemption.
SIPs or Systematic Investment Plans are the ideal way to go about investments in Child Plan Mutual Funds since small amount of overtime can accumulate into greater returns.