Parents are always worried about their children’s education and marriage. Keeping this problem of parents in mind, SBI Mutual Fund had launched such an investment plan last year, after investing in which you can be free from the worries of children’s education to marriage. SBI Mutual Fund had launched ‘SBI Magnum Children’s Benefit Fund Investment Option’ (SBI Magnum Children’s Benefit Fund-Investment Option) on 7th September 2020. Let us know about this fund.
The ‘SBI Magnum Children’s Benefit Fund Investment Option’ has a lock-in period of five years.
In simple words, the investment made in this fund cannot be withdrawn for five years (5 years) or till the child turns 18. However, money can be withdrawn from the fund if the child turns 18 before the completion of the five-year lock-in period. This new fund of SBI is a good option for children in the age group of 1 to 14 years. The parents of the child can invest in the fund through a joint account with him. They will manage it till the child turns 18. After that the account will be frozen. When the child completes the KYC process, the account will be activated again. Then the child himself can operate the mutual fund folio for this scheme.
Investment process
It is a solution oriented fund. This fund will invest at least 65% to 100% of your capital in Equity Exchanged Traded Funds (ETFs). At the same time, up to 35 percent of the investment can be invested in International Equities and 20 percent in Gold ETFs. For investment in Debt Funds, it will invest money in Triple-A rated security. At the same time, 10 percent can be invested in infrastructure investment funds.
Capital gains tax
The maximum expense ratio for the scheme has been kept at 2.25 percent of the assets. There is no dividend option in this scheme. In this, investors will get only growth option. SBI Children’s Benefit Fund has an option to invest up to 100% in equity. In such a situation, if the money is withdrawn in less than one year, then 15 percent Short Term Capital Gains Tax will be applicable.
What do experts say
Experts believe that apart from the lock-in period, there is nothing new in this. This is like a normal plan. There is no tax benefit in this either. There is no guarantee of even minimum returns, but investments can be made for the long term. Jigar Parekh, Founder and CEO, AnchorEDGE Trainings, says that this is an aggressive fund like a normal equity fund, but if you want to keep children in mind, then you can invest in it. If you invest money in it for 10 years, then you can get double digit returns. But the risk of the market remains in this.
Certified Financial Advisor Birju Acharya says that if you do not need money in the short term, then this is a good fund. But suppose you have accumulated a fund of seven lakhs and you need money, then you cannot do this because of the lock in it. Better to do SIP in a normal fund. Fund managers are more conservative in general tax funds, retirement funds and children’s funds. Therefore, the more returns you get from doing SIP in a normal mutual fund, the more the chances of getting higher returns are less in this fund.
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