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Children Funds

Targeted plans offered by mutual funds for children are usually hybrid funds with less equity exposure….

My wife and I want to invest to accumulate a good sum for our daughter’s future. Currently we have SIP of Rs 2,000 in HDFC Top 200 and Templeton India Pension Plan, Rs 1,000 in DSPBR Top 100 Equity, HDFC Equity and Reliance Regular Savings Equity besides Rs 500 in Reliance Growth and Reliance Diversified Power Sector Retail. Should I start SIP in UTI children’s career plan or HDFC children’s gift plan or buy more children specific conventional or ULIP plans?
- Dr. Sudhanshu Deshmukh

Your portfolio of seven funds provide diversification in numbers and not style or fund category, which is what is needed for long-term wealth creation. The portfolio lacks focus and character with the kind of funds that it has. You should try following the core and satellite philosophy to build a portfolio of core funds comprising large- and large- and mid-cap funds accounting for up to 80 per cent of your investments. The balance forms the satellite component which is made of mid- and small-cap, sector and thematic funds. You should exit Reliance Diversified Power and Reliance Growth, because both funds are not faring well, which is reflected in their performance. You should consider consolidating the core of your portfolio and add large-cap funds such as Franklin India Bluechip or ICICI Prudential Focused Bluechip Equity. Likewise, you should also exit Templeton India Pension Plan, because it has not been faring well ad losing performance. If it has completed three years of investments as the fund allows for premature withdrawal after 3 years at a nominal charge on the NAV.
The lesson for you is to track the performance of the funds that you have invested in at least once a year and assess its progress towards your financial goals. As for investing in targeted plans offered by mutual funds for children, you should be aware that these are mostly hybrid funds that have less equity exposure. For long-term goals, higher equity allocation is preferred and you should consider investing in large- or large- and mid-cap funds, which are highly rated and are backed by proven track record and performance history. Ulips are hybrid products that combine insurance and investments and in the process compromise on both the ends, for wealth creation, you should consider mutual funds over Ulips.

Fund Scheme  Category  Rating  3-yrs ret (%)  5-yrs ret (%)
DSPBR Top 100 Equity Large Cap ***** 10.82 14.12
HDFC Equity Multi Cap ***** 16.05 14.15
HDFC Top 200 Large & Mid Cap ***** 13.48 14.47
Reliance Diversified Power Equity: Others Not Rated 0.3 16.3
Reliance Growth Mid & Small Cap *** 8.17 13.1
Reliance Regular Savings Equity Multi Cap **** 9.99 15.31
Templeton India Pension Plan Hybrid: Debt-oriented Aggressive ** 7.72 8.04
Return as on August 30, 2011, Rating as on August, 2011

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