Mutual funds are considered one of the most effective investment avenues as they offer professional management, diversification, and asset allocation. They offer the convenience of investing and economies of scale to investors at large. Currently, the Indian Mutual Funds industry at large manages the assets to the tune of INR 39.50 trillion.
There are different types of mutual funds, apart from the broad categories of equity and debt. A subset of the equity mutual funds which provide a timely solution to specific goals is called solution-oriented funds.
Solution Oriented Funds are mutual funds which design their portfolio to achieve specific goals like retirement planning and child's education planning. It is a newly introduced category of mutual funds which has unique features, objectives, and strategies.
These funds were previously categorized under equity or balanced schemes. However, creating a separate category allows fund managers to follow unique strategies and deliver focused outputs. The fund manager of a solution-oriented fund is free to spread the portfolio across equity or debt tools and can also change the strategy for investors of different age groups. Some of the solution-oriented mutual funds also provide tax deductions. The majority of the schemes under this category have a lock-in period as the investment objective is of a specific duration.
The two major product categories within the Solution Oriented Mutual Funds are Retirement Benefit Funds and Children’s Benefit Funds.
For investors who are planning for retirement, post-retirement financial independence is the primary objective. To help them achieve their retirement planning goals, many Indian AMCs funds this purpose. These funds are convenient and follow different strategies to build wealth for the to-be retirees. Typical features and characteristics include,
In simple terms, a retirement fund is designed as a specific duration investment that aims to meet the specific goal of post-retirement financial freedom.
People invest in children’s funds to accumulate a corpus for their children so that they get the necessary finance to complete their education. Education in India is an expensive affair and can be a big burden on the budget of the common person. The humongous fees charged by educational institutions and the cost of study materials can lead to financial imbalances among parents. However, finance shouldn’t be a detriment for children with the potential to learn and excel. With a children's fund, a parent can ensure that no children are deprived of career-building opportunities.
Following are some of the best-performing mutual funds in these two categories put together,
|Name of the scheme||1 Year Returns||3 Years Returns||5 Years Returns||Assets under Management (In Crores)|
|HDFC Children's Gift Fund Investment Plan Reg Gr||3.53||16.34||12.07||5793|
|Tata Retirement Savings Fund Progressive Growth Reg Growth||-4.47||12.19||9.08||1293|
|ICICI Prudential Child Care Plan Reg Growth||2.33||12.82||9.53||879|
|UTI Children’s Career Plan Scholarship Option Reg Growth||-2.63||17.87||10.81||683|
|HDFC Retirement Savings Fund Reg Gr||1.79||16.05||12.48||883|