4 replies on this article “HDFC child gift investment plan”

1. Jagadees says:

   June 16, 2011 at 9:20 pm

   @Ramesh
   I would like to correct few points u mentioned above.
   1. HDFC children investment plan is indeed a equity-oriented balanced fund which can invest upto 75% in equity (currently it invested 72% in equity) and hence will enjoy tax benefit of equity funds.
   2. When i checked HDFC website it says that growth plan is available with fund.
   3. Performance of the fund also excellent in 3,5,7,10 year basis with returns around 16%.
   Correct me if am wrong.

   @sanjeet
   As ramesh mentioned there is no need to invest in the name of child. Just create separate portfolio in child’s name and invest in 2 diversified mutual fund as mentioned by him. Key here is investing continuously in both market ups and down with child’s goal in my mind.

   Regards
   Jagadees

   Reply
   1. Ramesh says:

      June 17, 2011 at 12:53 pm

      @ Jagadees
      Regarding your points:
      1. You can go through the offer document. [http://www.hdfcfund.com/CMT/Upload/ArticleAttachments/SID_CGF_01.PDF page 46] It shows the taxation like that of a debt plan.
      2. The growth plan is actually a bonus plan (ref. valueresearchonline.com). No specific dividend or growth plan is available.
      3. The performance has been good, I mentioned recently. Because of good recent performance, the last x years performance looks good (this is my own opinion). Over 10 years, HDFC Prudence has clocked 28%, while this fund has 18%. in last 3 years, the performance of both funds is similar.

      There is one other point in favor of this fund. It gives you an accident policy for parent for 10x of invested amount subject to a max. of 10 lakhs. if that is of any significance.

      I hope I am not wrong. But do check these out.

      Reply
2. Ramesh says:

   June 16, 2011 at 12:21 pm

   @ Sanjeet

   I will lay it out for you in simple terms.

   Principles:
   Aim= Growth of money (No requirement in between, mostly).
   Target amount and target period= known.
   A target amount of 10 lakhs in 18 years means an investment of 2,000 per month or around 20,000 per year @ 12% per year compounded will reach that value.

   Particulars:

   HDFC Children’s Gift Inv Plan is a hybrid plan which invests 40-65% in equity. This means it is NOT considered to be equity-oriented plan and does not have the benefit of long terms capital gains as applied to equity and equity-oriented hybrid plans (=considered to be when equity portion is >65%). The returns from this plan will be taxed with / without indexation benefits, etc. Hence, I would not recommend it for a such a long duration. Do not go with short term performance of a fund alone. Plus, there is no growth plan in that fund (only bonus).

   You should choose a mutual fund which is either mainly an equity or an equity oriented hybrid plan.
   Is there any particular need for the plan to be in the name of your child? I dont think there is any need for that. If still, you want that, I would advise you to go with Fidelity India Children’s plan – Education (Not marriage, not savings).
   Otherwise, go with HDFC Prudence (equity oriented) or go with a simple equity plan like Fidelity Equity / Reliance RSF / Templeton India Growth/equity income / IDFC Premier Equity / DSPBR Equity.

   And also do not go with child ulips.

   Hope this helps you.
   Ramesh

   Reply
3. Manish Chauhan says:

   June 16, 2011 at 11:01 am

   Sanjeet

   You can use our goal planner to plan for something , I am not sure how you have estimate that you would require 10 lacs after 18 yrs , the calculator is smart enough to find out how much you would need at some later point . So use it and look at the answer .

   The plan which you have mentioned seems to be a child ULIP , We generally dont suggest a ULIP to an investor who is not a market savvy person and does not understand the complexity of the product .

   Better keep it simple and use just SIP in mutual funds

   Manish

   Reply

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