Investing in mutual funds for children can be a wise financial decision to help safeguard for their long-term goals. However, choosing the right mutual fund requires careful consideration of various factors. Defining the investment objective for the child could be a starting point. You could estimate whether the investment is for an education or for their wealth creation. The investment objective will help in identifying the right investment horizon and strategy via a mutual fund.
We’ll look at:
- Three among the best mutual funds for children
- With common financial metrics under consideration
- Factors to consider before investing
Consider the different categories of mutual funds available and evaluate which one aligns with your investment objective. Each mutual fund category has its own risk and return characteristics.
For the investor,
Comprehending financial metrics to Mutual Fund investments for children – the fundamentals
Before initiating an investment in a mutual fund, consider these four financial metrics, among others, to help you understand if the chosen mutual fund aligns with your investment goals.
- Expense Ratio: Represents the annual fee charged by the mutual fund for managing the fund. A lower expense ratio means a higher portion of your investment goes towards generating returns.
- Minimum Investment: Is the minimum amount an investor must contribute to initiate or maintain an investment, in a particular mutual fund. The minimum investment can vary based on the type of mutual fund and investment objective
- Annual Average Return: Measures the annualised rate of return on a mutual fund investment over a specific time period. It calculates the geometric mean of the fund's annual returns, taking into account the compounding effect. Longer time periods provide a more comprehensive perspective of the fund's potential to generate returns.
- Exit Load: Is the fee charged for redeeming units before a specified period.
By analysing these four essential metrics in context with other factors, investors can develop a well-rounded investment strategy. It is important to note that no single metric provides the complete picture. Investors should consider a comprehensive analysis before making investment decisions. Remember to do your independent research, consult with a financial advisor and review your investment strategy regularly, to know if it aligns with your financial goals.
3 Mutual Funds to consider for children
SBI Magnum Children's Benefit Fund
| Fund Details
| |
| Expense Ratio
represents the annual fee charged by the mutual fund for managing the fund
| 0.9% |
| Minimum Investment – One Time
the minimum amount an investor must contribute to initiate or maintain an investment
| ₹5,000 |
| 1-Year Return
| 27% |
| Exit Load
the fee charged for redeeming units before a specified period.
| 3% |
ICICI Prudential Child Care Fund
| Fund Details
| |
| Expense Ratio
represents the annual fee charged by the mutual fund for managing the fund
| 1.7% |
| Minimum Investment – One Time
the minimum amount an investor must contribute to initiate or maintain an investment
| ₹5,000 |
| 1-Year Return
| 19% |
| Exit Load
the fee charged for redeeming units before a specified period.
| 0% |
LIC Children’s Gift Fund
| Fund Details
| |
| Expense Ratio
represents the annual fee charged by the mutual fund for managing the fund
| 1.8% |
| Minimum Investment – One Time
the minimum amount an investor must contribute to initiate or maintain an investment
| ₹5,000 |
| 1-Year Return
| 16% |
| Exit Load
the fee charged for redeeming units before a specified period.
| 0% |
In conclusion,
Investing in mutual funds in India requires careful consideration of various financial metrics and other factors. Mutual funds may also offer an affordable investment avenue, keeping in mind a child’s long term future. Remember, it's always recommended to consult with a financial advisor and conduct independent research before investing in mutual funds.
*Past performance is not indicative of future results. Investing in mutual funds involves market risks.
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.