Fidelity India’s Children Plan covers education, marriage and savings goals.
A goal-based children’s plan is the latest offering by Fidelity India. Although a few fund houses and insurance companies have introduced such schemes, Fidelity is positioning its product as an avenue for securing the child’s future. No wonder, these cover goals such as education, marriage and savings. “Fidelity India Children’s Plan, with its goal-based options, presents a unique opportunity for disciplined wealth creation for children,” according to the company’s press release.
Investments can be made on behalf of minor children only. And, each fund has a separate asset allocation. The education fund will put 70 per cent in equities and 30 per cent in debt. The marriage fund will allocate 70 per cent in equity, 20 per cent in gold exchange-traded funds and 10 per cent debt. And, the savings fund will buy only debt and money market instruments.
Education fund
Experts say this fund is no different from a balanced fund. “The only difference is that it has a goal attached. The tendency to tinker with investments will be low, as it has a long-term horizon,” says Hemant Rustagi of Wiseinvest Advisors.
But 30 per cent in debt for a goal, which could be 15 years away, does not make financial planners happy. “If one has a long-term horizon, such as 15 years, one should adopt an aggressive investment strategy,” says Suresh Sadagopan of Ladder7 Financial Services. For a five-year-old child, you have an investment horizon of at least 15 years. The debt portion will hardly give an upside to your portfolio as compared to equity.
Instead, balanced funds are a good bet for shorter duration of five-seven years. It will give the equity fillip and capital protection. Balanced funds gave 11.7 per cent, lower than equity diversified funds’ 12.65 per cent over five years, according to mutual fund tracking agency, Value Research, as on January 28 this year. The Sensex gave 12.44 per cent and Nifty 12.78 per cent.
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Marriage fund
It is a multi-asset fund investing in three asset classes — equity, debt and gold. Inclusion of gold will hedge the downside in equities as returns from gold are inversely proportional to equities. “It is not a new theme. There are similar products in the market, but they were launched only last year,” says Rustagi.
The existing products are Religare MIP Plus, Taurus MIP Advantage, Axis Triple Advantage and Canara Robeco InDiGo; launched between May and July last year. The oldest of the lot — Canara Robeco InDiGo and Religare MIP Plus — returned 3.70 and 1.77 per cent, respectively, in six months.
Saving fund
It is meant for risk-averse investors, as it will invest only in debt products. Similar products such as Templeton India Income Opportunities and IDFC SSI Medium Term Plan A returned 6.14 per cent and 6.33 per cent, respectively, in one year, while the overall category gave 4.53 per cent. “These products are for capital preservation and not generating high returns. If you are investing in debt products to create a corpus, you could look at PPF that gives a higher annual return of eight per cent,” says Sadagopan. Both your investment and the interest income will be tax-free. While the product offers various choices, there are other options too. Consider the time horizon before you decide.