Sahi Hai
Solution Oriented Mutual Funds

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.

What is a Solution Oriented Mutual Fund?

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.

Retirement 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,

• Retirement mutual funds gather the contribution during the earning age of the investor.
• For young investors who are in their earning age, these funds follow an aggressive style of investment by selecting high-risk stocks in the portfolio. As the investor’s retirement is a few decades away, high-risk stocks add decent value to the contribution in the long term by weathering market ups and downs along the way.
• For investors approaching their retirement age, the fund shifts to a more moderate or conservative plan of the same scheme. As the age of the investor advances the retirement fund switches to a less risky portfolio.
• By the time the investor reaches the age of retirement, his or her fund would see handsome growth through the previously aggressive plan. The defensive portfolio helps the corpus to conserve the accumulated amount and continue to add a steady return through safer debt investments.
• These funds allow lumpsum redemption or periodic withdrawals. Regular withdrawals in the form of pensions help the investor to meet post-retirement financial needs and commitments.
• Retirement funds generally have a lock-in period of 5 years. Exit load is applicable if withdrawal is requested before retirement or before the investor reaches 60 years of age.

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.

Children’s Funds

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.

• Ideally, a children's fund investment must be initiated before or immediately after the birth of the child so that the fund gets maximum time to grow.
• Children’s mutual funds generally have two different plans. One is equity-oriented while the other is a risk-free debt-oriented plan.
• In the case of children who are young or are about to be born, the equity-oriented plan is better as such plans tend to deliver a better return in the long term.
• For children who are about to complete their primary schooling, the limited time calls for investment in a debt-oriented plan instead.
• The investment between the two plans can be altered depending on the age of the ward.

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