The Mutual Fund Show: How To Create Wealth For Your Children

Large and mid caps, flexi caps and dynamic bond funds are some schemes that investors can consider for their children, said Arnav Pandya.

<div class="paragraphs"><p>(Source: Freepik)</p></div>
(Source: Freepik)

Starting early and having more time for accumulation enables faster compounding of money, leading to the creation of wealth for your children's education, according to Kirtan Shah, managing director of Credence Family Office Pvt.

If you decide to allocate more towards a specific goal—in this instance, the education of your children—and you start late, you may have to make sacrifices in pursuit of your own goals, said Arnav Pandya, founder of Moneyeduschool.

"At this point, the retirement goal is often the one that gets compromised, as it is still a distant prospect for most people," Pandya said.

He offered the following tips for investing in a children's fund:

  • Begin as early as possible.

  • Balance portfolio for needs.

  • Money is required for certain goals, so debt is required.

  • Children's funds should be considered.

  • Investment amount depends on goals and time horizon.

"Conservative investors can go for traditional instruments like FDs, " advised Shah on determining wealth creation.

Before planning wealth creation for children, he recommends that investors consider requirements, the reason for investment and the age at which the goal should be due.

Large and mid caps, flexi caps and dynamic bond funds are some of the funds investors can consider for their children, said Pandya.

The Sukanya Samriddhi Scheme, HDFC Children Gift Fund and ICICI Pru Child Care Fund are his picks for children's funds.

Shah's top picks include Nippon Large Cap, Kotak Equity Opportunities, Quant Midcap and SBI Small Cap.

Solution-Oriented Funds

With solution-oriented funds which are focused on achieving a specific goal, it depends on what kind of investor you are, Shah said. "But, sophisticated investors may ignore this category."

He lists the following key features of solution-oriented funds:

  • Most schemes are hybrid.

  • Performance is not superior versus the flexi-cap.

  • TER is higher vs flexi-cap.

  • Track record is not very old.

Query 1: I am investing in a few funds and saving for 10 years. I would like to accumulate Rs 75 lakh for my child's education. Are these funds the right choice?

HDFC Balanced Advantage Fund: SIP Rs 5,000.

HDFC Multicap Fund: SIP Rs 5,000.

SBI Bluechip Fund: SIP Rs 10,000.

Parag Parikh Conservative Hybrid Fund: SIP Rs 10,000.

Name: Akshay | Age: 34 years.

Kirtan Shah: It would be fantastic if he could raise his SIP amount. Given that you have a 10-year target, you ought to boost the equity side amount. Continue with your HDFC Multicap Fund and SBI Bluechip Fund. Move your HDFC Balanced Advantage Fund and Parag Parikh Conservative Hybrid Fund into a large and a mid-cap fund.

Query 2: Planning to invest Rs 1 lakh in mutual funds for my son's education and wealth creation. Can you recommend me some schemes?

Name: Prachi | Age: 44 years.

Arnav Pandya: Consider investing in a few equity funds, such as HDFC Flexicap from the flexi-cap category and Canara Robeco Bluechip Fund from the large and mid-cap space. You may also want to explore a hybrid fund like a Balanced Advantage Fund.

Watch the full conversation here:

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