Ask Morningstar: Do you need a children's mutual fund?

Jul 14, 2022

Is there any advantage to a Children's Gift Fund as against a regular fund scheme? 

Children’s funds invest in a mix of equity and debt instruments with an objective of either wealth or income generation.

Depending upon the objective, their allocation is tilted towards equity or fixed income. The category currently has wide variation in the asset-allocation followed by funds with the equity exposure ranging from 21% to 98%.

They are subject to a lock-in of either five years or till the child attains 18 years (age of majority), whichever is earlier. Besides the lock-in period, which is to enable investors stay invested, these funds do not offer any benefit to investors relative to other categories.

It is advisable to consider other pure-play equity and debt funds to have better control over the desired asset allocation and select funds with a long-term track record.


Articles authored by DHAVAL KAPADIA

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