Investment for child: Birla MF Bal Bhavishya NFO – Is it amongst the best plans for children related investment?

 Bal Bhavishya Yojna, mutual funds,retirement, equities, debt, SIP, SWP

There aren’t many MF schemes targeting needs such as arranging down payment for a home loan, children education and marriage needs or one’s own retirement.

When it comes to investments for child, most parents are in a fix and unable to find a dedicated investment for meeting financial goals of the children. However, for specific goals, such as child education, it helps to earmark the funds towards it and not run the risk of making a premature exit before the goal is met. Mutual funds that are child-focused schemes may come handy to meet this need. Few child and retirement focused MF schemes exist but have not been so popular among the investors so far, primarily because of low equity exposure in them.

Aditya Birla Sun Life mutual fund is launching Bal Bhavishya Yojna, an open ended fund for addressing the financial needs of children. The scheme’s new fund offer (NF0), opens on January 22, 2019 and ends on February 05, 2019.

Is the child unit holder?

At the time of applying, details such as date of birth of the minor child, who has to less than 18 years of age, is to be provided. The minor shall only be the sole unit holder in the folio and even the joint holding is not allowed. The details of the parent ( Donor) including the KYC requirement, who invests the funds will also have to be provided. However, all communications by the fund house will be done favoring the child i.e. the beneficiary of the units. On the day when the child attainment majority, no fresh transactions will be allowed till the fund house receives documents showing the change of status from minor to major. The above restrictions give a sense of security as far as one’s goal-setting is concerned.

How long will the funds be locked in?

Being a focused scheme, there will be a lock-in for at least 5 years or till the child attains age of majority (whichever is earlier). So, if the age of the child is 3, the lock-in will end when he child the attains the age of 18. the parent will get a time period of about 15 years to save specifically for the child needs.

What if funds are required before child turns major?

Typically, open ended funds do not have exit load after 6 months or 12 months of holding the units. However, this being a focused scheme, for redemption of units before child attains 18 years of age or 5 years from the date of allotment, 1 percent of applicable NAV will be the exit load.For redemption of units after the completion of lock-in period, there will not be any exit load.

Should I choose equity or debt to save for child needs?

When the horizon is far, the equities have shown to generate high inflation adjusted return than other asset classes. However, the scheme provides both options to choose from – Wealth Plan ( equity) and Saving Plan (debt) .

The primary investment objective of the Wealth Plan is to seek generation of capital appreciation by creating a portfolio that is invested primarily in equities by allocating 65 percent to 100 percent in equity related investments. On the other hand, the primary investment objective of the Saving Plan is to seek generation of capital appreciation by creating a portfolio that is invested primarily in debt by allocating 75 percent to 90 percent in debt related investments, while investments into equities will have a mandate of 10 percent to 25 percent of total portfolio.

The benchmark for the Wealth Plan will be S&P BSE 200 while for the Savings Plan, it will be the CRISIL Hybrid 85+15 Conservative Index. Choose to opt for the plan based on your risk profile and the numbers of years left to fund child needs.

What to do

Its a focused scheme for child needs and suit those who lack the financial discipline to manage one’s own MF portfolio to meet long term needs. The reason the focused plans help in accumulating funds for a specific purpose is that one, they come with lock-in period and secondly, instils the financial discipline to save for the long term.

Once decided, one may invest in the scheme through SIP and later on at the time of need, the units may be withdrawn as per the requirement through SWP. On attaining maturity, the status of the account is changed in favour of the major child and this may serve as an opportunity for the child to learn the wisdom of investing at an early age.


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