Axis Mutual Fund came up with an NFO (new fund offer) named as Axis Children’s Gift Fund. This fund came up with an emotional tag of Children’s Gift. The offer will be available from 18th Nov to 2nd December, 2015.
Well, in my view this fund is using the major emotional tag of any parents i.e “Children’s Future” of “Child Plan”. To authenticate the fund offering, Axis provided the below facts about the cost of raising a child.
- Cost of school education has risen by 150% in last 10 years.
- In the last 5 years, average annual private expenditure for general education has shot up by 175%.
- In the last 5 years, Average rise in the fees of Top 3 IIMs has been around 242%.
I don’t have any second thought or negating the cost of education. But whether this fund alone is enough to meet the goal? Let us see the features of this mutual fund product.
- Investments can be made only in the name of a minor (<18 yrs at the time of investment).
- Unit holder till attaining Majority shall be represented by his / her parent or legal guardian.
- Parents, guardian, grandparents or relative can invest in the name of minor kid.
- You have both Regular and Direct Funds (DEFAULT WILL BE DIRECT).
- This plan comes with lock and no lock in facilities. You can opt anyone. In case of lock-in, investment will be locked-in till the kid is 18 years of age. Investment may be redeemed after kid is 18 years of age or 3 yrs, whichever is later. In case of no lock-in, investment will not be locked-in till the kid is 18 years of age & can be redeemed at any point of time at NAV based prices subject to exit load.
- Exit loads are structured as-3% if exited within 1 year, 2% if exited after 1 year but before 2 years, 1% if exited after 2 years but before 3 years, No exit load after 3 years.
- Fund Options-Growth, Dividend (Dividend Payout and Reinvestment Facility-reinvestment option is available under No Lock-in sub-plan only).
- Asset allocation will be like 25% to 55% in Debt and money market instruments, 40% to 60% in Equity and Equity related instruments and 5% to 15% in Cash-Futures Arbitrage.
- Benchmark will be 50% CNX Nifty + 50% Crisil Composite Bond Fund Index.
- The full detail of the NFO will be available HERE.
Now let us review the fund from investors point of view-
# Why to invest in NFO when there are so many old funds which have a track record to judge?
# This is the typical equity mutual fund. But used the name as Children’s Gift Fund. However, for your kid’s education or marriage, you can invest in existing and consistent performed fund.
# Never be emotional with the products which claim to be meant for your kid’s planning.
# This fund will have heavy exit loads if you planned to withdraw within 3 years. So if the fund is not performing well, you have to wait for at least 3 years to be out of it.
# I don’t think it is necessary to provide two facilities like lock-in and no lock-in.
# This fund is treated as equity mutual fund. However, this fund not answers about how one must invest in debt category to manage debt:equity. Investing in equity fund alone is not a right strategy of investment. One must have debt category too.
# The only new point of what I saw is, this fund uses the arbitrage opportunity available in market to the extent of 5% to 15% of your portfolio.
# Notice the benchmark. It is 50% CNX Nifty and another 50% Crisil Composite Bond Fund Index. Therefore, if the fund claim to beating the benchmark, then it does not mean that it is beating NIFTY. Because, only 50% of the benchmark returns are linked to NIFTY.
# When the fund is meant for long term goal of kid’s education, then why it is providing dividend payout option?
# In my view, it is nothing but a gimmick to utilize the emotions of parents for investment towards kid’s education. Nothing new to offer.
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sachin dongarwar
Hello Sir,
i reviewed this fund on valueresearch. my question is:
for regular plan expense is 2.53% whereas for direct plan expense is 0.38. why this significant difference?
as per my little knowledge a fund with low expense will give higher returns n vice versa…or please correct me if i am wrong.
is it better to go for direct plan or regular for this particular fund?
thank you.
Basavaraj Tonagatti
Sachin-They may be compensating higher % to middlemen to garner the AUM. Low expense ratio does not mean higher returns. However, if you are comparing regular to direct for this fund, then direct seems to be always best.
Abhijeet
Hello sir
I’m Abhijeet and I’m a silent reader of your financial blog and it’s a great approch for investors. I want to invest 5000 p.m in mutual fund for my son ( 5yrs)education and I have 12-13 yrs for saving for him(till 18yrs). In this regarding how i invest for my goal? Which type mutual funds would be helpful… pls suggest
Regard
Abhijeet
Basavaraj Tonagatti
Abhijeet-You can have 30:70 debt and equity exposure. For debt, you can use short term or ultra short term debt funds. For equity mutual funds, one large cap fund and one small and mid cap fund is suffice.
Abhijeet
Thank you sir for your valuable opinion. Please suggest some well performed mutual fund company and divide(5000)how much amount I invest for my requirement..
Smitha
Hello Basavaraj,
First of all i would like you thank you for detailed informative articles on your blog. I visit your blog regularly. Can you please suggest a good fund for retirement . I am planning to invest 5000 per month for 20 years.
Thanks,
Smitha
Basavaraj Tonagatti
Smitha-Funds are listed in my old blog post. Please refer the article and comments at “Top 10 Best SIP Mutual Funds to invest in India in 2016“.
kiran pani Thota
Hi Basu,
My sis want to invest in MF for her son graduation fee , Kid is 9yrs old so 8yrs left for starting his graduation. can you suggest how the portfolio for this scenario should be? and if possible name the few funds which you recommend.
I suggested her to seperate this portifolio with remaining , I hope every goal should have its own debt:equity ratio. Is my thinking correct?
Basavaraj Tonagatti
Kiran-Let her invest in one large cap fund like Franklin India Bluechip Fund or Birla Sunlife Frontline equity Fund and one short term debt fund like HDFC PSU Banking Fund. Debt to equity must be in the ratio of 60:40.
KIRAN PANI
Thanks a ton Basu.
shubhangi
Thank you sir
shubhangi
Hi sir . Thank you for your prompt reply. I am 34 yr old. Having 2 yrs of daughter. I am very new to mutul fund . I want to invest Rs 50000/- lumsum in mutul fund. According to you kindly advise which fund is better for my daughter education purpose for 10 to 15 year.
Basavaraj Tonagatti
Shubhangi-Invest 70% in one large cap and one small and mid cap fund. 30% in short term debt fund.
shubhangi
My daughter is 2 yrs old. I want to invest Rs 50000/-. Should i invest in hdfc childern’s plan or in Hdfc mid-cap opprutunities fund for long period . Kindly advice
Basavaraj Tonagatti
Shubhangi-Don’t invest in both the funds. Because the first thing, you don’t know when you need money second thing both are equity products. You must diversify your investment.
Vinod
Sir,
Would you please advise the more details of “HDFC Balanced Fund”?
I want to know the Basic things.
Thanks, Vinod
Basavaraj Tonagatti
Vinod-It is typical equity oriented balanced fund where around 35% will be exposure towards debt. This being considered as equity fund for taxation, holding period for more than a year is tax free. Hence, your 35% debt category will also be tax free. What more you need?
VICKY
Hi Basavaraj,
i have a daughter of 2 months old and want to save for her education/marriage.
Should i go with Sukanya Samriddhi Account or invest in some SIP or should i go for some child plan(in this case suggest the best child plan ). i plan to invest 10000 p.m.
Regards,
Vicky
Basavaraj Tonagatti
Vicky-First buy a term plan to cover your life risk. Second, try to invest in both debt (use PPF, Sukanya Samriddhi-if you felt so, or short term debt funds) and equity (well diversified equity mutual funds) in the raio of 40% in debt and 60% in equity. Stay away from any child plans.
Abhijit Biradar
Hi,
Thanks for this informative blog. It releally help me a lot regarding mutual fund understanding.
I have a basic query regarding my investment planning.
I am a salaried person. I can save arround 3 to 3.50 lakhs per year. I have a plan to buy a flat after exact 5 years. So, after 5 years I will need arround 15 lakhs for down payment & flat related process.
So, can you pls suggest how I should plan so that will get that much money? As, I am salaried person, so I am planning to invest 1.20 lakhs in Axis ELSS fund. Apart from that investment where should I invest so that I will achive my goal after 5 years.
Basavaraj Tonagatti
Abhijit-Avoid any equity product as your goal is just 5 years (even ELSS). Use short term debt funds.
Sachin
Hello sir, I am investing in HDFC Children’s Gift Fund-Investment fund and am planning to grow funds here for my * yrs daughter (currently). I have chosen this as it is a hybrid balanced fund with medium risk. What you think of this fund? Is it good or should i switch to something else?
Basavaraj Tonagatti
Sachin-You can continue.
ashish
Hi Basavaraj,
According to you which is the best option to invest money for securing children’s education & marriage?
Ashish
Basavaraj Tonagatti
Ashish-Equity investment. But not to 100%, you have to manage debt:equity based on timeframe.
Vijay Choube
For my kids (Daugter 11yrs & Son 7 yrs) which child future care MF should I prefer? Just launched Axis children’s Gift Future Vs others like HDFC child & others? Pl. guide! Thanks
Basavaraj Tonagatti
Vijay-If we consider your kids education at 18 years of their age, then the goal is just around 7 years and 11 years away for respective kids. Considering all these factors, I suggest you to have separate equity mutual funds and debt portfolio at the ratio of debt:equity in 40:60. But stay away from such fancy funds.
Rajeshwar Reddy
Dear Sir,
I have 2 concerns.
One is few of my clients fear of investing in Mutual Funds and are prefering SBI Life Insurance child plans (may be because of misselling and Brand name of SBI). Can this be a tool to make them slowly habituate to Mutual Funds?
Second is , Few clients are investing in Mutual funds but not continuing for whatever might be the reason.Due to some emergency they are withdrawing the funds.Can this be promoted to them with lockin option? Because with 60% exposure to equity i think it gives decent returns over more than 10 Yrs period.
Basavaraj Tonagatti
Rajeshwar-It may but look at the drawbacks I listed. If they are invested based on their goals then I think they will not withdraw.
Ramasamy
Hello Sir,
I am 60 Years old. Now i want to park 2,00,000 (2 lakh) in Liquid fund for next 3-4 months time. My income is less than 2.5 lakh (After including the Capital gain due to Debt mutual fund also)
Since My income not crossed 2.5 Lakh, I need not to pay income tax, Am I correct? or Is it necessary to pay capital gain tax for the returns from the Debt mutual fund
Regards,
Ramasamy
Basavaraj Tonagatti
Ramasamy-If your capital gain from liquid fund and other income falls less than Rs.2.5 lakh, then you no need to pay tax.
Ramasamy
Thank you
Ashish banerjee
“When the fund is meant for long term goal of kid’s education, then why it is providing dividend payout option?
In my view, it is nothing but a gimmick to utilize the emotions of parents for investment towards kid’s education. Nothing new to offer.”
This one was gr8…………
Basavaraj Tonagatti
Ashish-Thanks 🙂
Brahmananda Reddy
Very good review Basu sir… Thank you 🙂
Basavaraj Tonagatti
Brahmananda-Pleasure 🙂