solution-oriented

Solution Oriented Mutual Funds

Solution Oriented Funds are the mutual funds which design their portfolio to achieve a specific goal like retirement planning and child’s education planning. It is a newly introduced category of mutual funds which has unique features, objectives, and strategies. Read to grasp everything you need to know about solution oriented mutual funds.

  • Total Funds 31
  • Average annual returns 3.87%

What is Solution Oriented Mutual Fund?

Mutual funds in India have enhanced financial stability and helped investors in achieving their financial objectives over the last 3 decades. Goals like long term & short term capital appreciation and wealth creation can be achieved by pure equity, debt, or hybrid mutual funds, but to achieve a composite goal like retirement planning or child’s education, mutual fund AMCs deliver solution-oriented mutual funds which are strictly designed to achieve a specific objective.

  1. What are Solution Oriented Mutual Funds?
  2. Types of Solution Oriented Funds
  3. Who Should Invest in Solution Oriented Funds?
  4. Top Performing Solution Oriented Funds
  5. When To Start Investing in Solution Oriented Funds?
  6. FAQ on Solution Oriented Funds
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Types of Solution Oriented Mutual Funds

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What are Solution Oriented Mutual Funds?

Solution Oriented Fund is a recently introduced category of mutual funds by SEBI. It has created an easy path for the financial planning of complex long term objectives which may or may not need alteration in the strategy with respect to time. The schemes under this category have been operating long before the formation of the category. These funds were previously categorised under equity or balanced schemes. However, the separate category allows fund managers to follow unique strategies and deliver eccentric outputs. The fund manager of a solution-oriented fund is free to furbish the portfolio with 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. Majority of the schemes under this category have lock-in period as the investment objective is of long term.

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Types of Solution Oriented Funds

Based on the investment objective, SEBI has divided solution oriented funds into two sub-categories:

1.Retirement Funds

Financial independence in the post-retirement era is one of the most looked out objectives for millions of investors. To cater the retirement planning goals, various AMCs in India have mechanised plans for this specific purpose in a convenient, reliable and innovative manner. Every retirement fund follows a different strategy to enhance the financial strength of retirees.

Retirement mutual funds aim to provide financial assistance to the retirees by gathering the capital during the earning age of the investor. These funds follow an aggressive style of investment by selecting high-risk stocks in the portfolio when the investor is in the young and earning stage. As retirement is mostly more than 15 years away from such investors, high-risk stocks add significant value to the investment allowing more capital to be built for retirement planning.

As the investor approaches the retirement age, the corpus is generally shifted to a moderate or conservative plan of the same scheme which has a less risky portfolio. When the age of retirement is reached, the investor would’ve gained enough funds through the aggressive plan and hence a defensive portfolio can conserve the gathered amount and add regular incomes through debt securities. In simple words, the risk in the portfolio of retirement planning fund keeps reducing as the garnered amount through high-risk tools increases. These funds allow redemption either as a lumpsum or through periodic withdrawals which act as a pension to maintain the financial stability of the investor in the post-retirement era. These funds have a lock-in period of 5 years and charge exit load if redemption is made before retiring or reaching 60 years of age.

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2.Children’s Funds

The children’s fund aims for the financial assistance of the young ones until their education is completed. Education in India is getting expensive day by day and for a common man, it can be a tough task to pay gigantic fees for the education of children. This can embark sudden financial imbalances on parents while some children with potential to learn are barred from studying further and achieving their dreams due to the financial situation. Proper planning and necessary steps taken at the right time can help in avoiding these kind of inconveniences.

Mutual fund AMCs in India have structured mutual funds which specifically aim for the financial planning of children’s education and other financial needs of the young ones. These funds follow a unique strategy to gather the corpus at a slow and steady pace when the child is young and the expenses are low. Later on, when the child comes at the age of attaining expensive education or any other financial assistance, the invested capital can be used. These funds may or may not use different plans with different portfolio structure to achieve their objective. The investment must be started before or right after the birth of the child to plan better tomorrow of your young ones.

Most of the children’s mutual fund has 2 different plans out of which one is equity oriented and the other is debt oriented. If the child is young or is about to be born, the equity-oriented plan can be chosen which can deliver higher returns in the long term. The debt oriented plans are for those children who are about to complete their primary schooling. The investment between both the plans can be switched depending on the age of the child.

Top Performing Solution Oriented Funds

 

Who Should Invest in Solution Oriented Funds?

Solution oriented mutual funds are mechanised to fulfil a specific goal. The portfolio of these funds is designed in such a way that the investor need not invest in any other scheme for that particular objective. These funds can simplify financial planning for specific goals. For long term goals, equity-oriented schemes must be chosen as these funds can be volatile for short term investments. Those who plan to invest in solution oriented mutual funds for short term goals must choose the debt oriented funds. The investment tenure in solution-oriented funds must be long enough to allow the investments to amplify. Suitable investors must start investing as early as possible for a satisfactory outcome. The risk associated is lower if the investment tenure is longer but the outcomes of solution oriented funds are subject to market risk and high returns are not guaranteed. However, if the funds are chosen according to the suitability and the investments are started at the right time, the chances of gaining better returns increases.

When To Start Investing in Solution Oriented Funds?

Investments in the solution-oriented fund must be started as early as possible. Know about right time to invest in the different types of solution-oriented funds:-

1.For Retirement Planning

Most of the youngsters do not give enough importance to retirement planning until they come closer to retirement. For a convenient and financially independent lifestyle of retirees, the investments must be large enough and must be started as soon as an individual starts earning. The long tenure will provide more gains on the SIP investments. For a serene post-retirement era, the ideal age to start investing is 30. Investments started before that can yield even better returns.

2.For Children’s Planning

You are responsible for the financial assistance of your children until they come to age when they start earning for themselves. With the rising expense in the education system, it is essential to plan strategically for the financial needs of the infants. To plan for the financial assistance for college fee, one must start planning as soon as the child is born. For the expenses of the school, one must be well prepared before the birth of the child as the school fees are constantly increasing at a rapid pace.

“Fail To Plan is a Plan to Fail”

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Every smart citizen must be prepared for the financial burden which will be incurred in the future. If planning of the future expenses is done in the right manner, the financial imbalances can be avoided. By investing in mutual funds for the long term goals like retirement planning and children’s education, the investor can enjoy a better tomorrow by paying less. Connect with our team of experts to plan for your future financial goals in a most optimum manner.

FAQ on Solution Oriented Funds

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Frequently Asked Questions

Who should invest in Mutual Funds?
funds are suitable for the investors who can digest high risk in search for higher returns. Moreover, these funds are not suitable for the investors who are stepping in the finance market with a short term investment perspective as they might end up delivering negative returns.
What is the minimum investment required for investing in funds?
The minimum investment depends from one scheme to another. In general, for lumpsum investment the minimum investment can range from Rs. 500 to Rs. 5000. Whereas, in case of SIP, the range may vary between Rs. 500 to Rs. 1000. For authentic information, never forget to check the scheme related documents.
What is the investment philosophy followed by companies?
The fund manager of fund targets the best small sized companies having the potential to generate excellent gains in the future. Such companies do not have much resources as the large cap or mid cap companies but have high potential to outperform many big companies.
Why to invest in funds?
funds have more tendency of providing exceptional returns than the other categories of funds. Moreover, they can also be a suitable option for providing diversification to your portfolio.
How risky are funds?
funds are one of the riskiest mutual funds. But at the same time rewards are also high. Therefore, an investor who is willing to expose his corpus towards risk for fetching higher returns should invest in funds.
Are Funds for long term investment?
Yes, funds are a suitable choice for generating long term capital appreciation. Moreover, in short term these funds can cause double digit losses to the investors. Thus, always maintain a long term investment perspective while investing in mutual funds.
What is the benchmark of Fund?
Benchmark is a standard with which a mutual fund competes in terms of growth & performance. Different funds have different benchmark. Thus, read the mutual fund document carefully to know the benchmark.
What are the taxes applied on Mutual Funds?
funds are eligible for two types of taxes- STCG (Short Term Capital Gain) and LTCG (Long Term Capital Gain). STCG is the capital gain generated on the units which are hold for up to 1 year. The STCG tax imposed by the Government of India is 15%. LTCG is the profit generated on the units which are hold for more than one years. The LTCG levied is 10% for the profit above Rs. 1 Lakh.

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