I want to invest each and every month for my daughter’s larger education. Should I opt for a kid program or invest in a big cap fund?
—Mohit Sharma
Funds categorised as ‘children’s funds’ are topic to a lock-in of either 5 years or till the kid attains 18 years, whichever is earlier. Post attaining majority, all transactions by the parent/ guardian are frozen and the kid is needed to submit needed documents needed to allow him/her to operate the account. Children’s funds invest in a mix of equity and debt instruments with an objective of either wealth or earnings generation. Depending upon the objective, their allocation is tilted towards equity or fixed-earnings.
Given the lock-in period with an aim to encourage investors to stay invested, these funds do not supply any advantage to investors relative to other categories. Hence, it is advisable to contemplate other pure-play equity and debt funds to have superior handle more than the preferred asset allocation and pick funds with a extended-term track record. Ideally, an asset allocation-based strategy (mix of equity and debt) must be followed for investing towards one’s aim. Longer the investment horizon and larger the threat appetite, larger can be the allocation to equities, which in spite of getting more volatile is the most favoured asset class for wealth generation more than the extended term.
A big component of your equity exposure must be allocated to pure big-cap funds, and the rest to mid-cap and compact-cap funds. You must also contemplate allocating some exposure to international equities. The fixed-earnings exposure can be into accrual funds keeping a higher credit high quality portfolio such as banking PSU funds, corporate bond Funds, ST Income funds, and medium-to-extended term funds.
Is there any lock-in period for gold ETF? I am producing losses as I purchased a lot of gold ETF final year when the costs have been increasing, but are falling now.
—Arvind Deshmukh
No, gold ETFs are not topic to any lock-in. Gold ETFs like other securities are traded in the secondary industry and investors can purchase and sell ETF units in the secondary industry at any point in time, topic to out there liquidity.From an asset-allocation standpoint, it is advisable to have some allocation to gold (5% to 10%) for diversification added benefits.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to