Few investors get into a panic mode within six months of investing in mutual funds. Due to their apprehensions, they ask experts whether they should hold or sell their investments. This is a bit surprising, considering the fact that mutual fund investments shouldn’t be treated as ‘day trading instruments’ and should be held for a long time horizon to achieve the much desired financial goals. Therefore, goal-based schemes make sense as investors will stay in these mutual fund plans for a stipulated period till their goals are achieved and will not press the panic button when markets turn volatile.
Suitable for Retail Investor
Goal-Based Funds are very similar to the products launched by insurance companies and now, mutual fund houses are also slowly bringing similar products for the retail segment. These products definitely help in financial planning and promote long-term investments. In the case of return-based funds, an investor will normally start an SIP for a 10 year period and then if he sees consistent underperformance for a period of 3 years, he exits the fund. Thereby, the entire purpose of investment is lost.
Composition of Goal Based Funds
Goal – based funds are similar to balanced funds as they allocate their portfolio between equity and debt components depending on the goals to be achieved. For e.g., the allocation to debt will be in the range of 60% to 100% in a normal retirement plan while, the equity component will be ~ 40%. “UTI Retirement Benefit Pension” was the first goal-based plan in the mutual fund industry, launched in 1994. This was followed by a series of children’s plans and one more retirement scheme from Franklin Templeton Asset Management. After a gap of 7 years, fund houses are once again showing interest in launching these products, as can be seen from the two new schemes launched in 2011 namely, Fidelity India Children’s Plan and Peerless MF Child Plan. There are more funds in the pipeline - Tata Retirement Fund, IDFC Retirement Fund and ICICI Prudential Lakshya Fund. (Check out Upcoming Mutual Fund Offers).....(Read More)
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| Dr. Renu Pothen The author is a Research Manager at Fundsupermart.com India |
Suitable for Retail Investor
Goal-Based Funds are very similar to the products launched by insurance companies and now, mutual fund houses are also slowly bringing similar products for the retail segment. These products definitely help in financial planning and promote long-term investments. In the case of return-based funds, an investor will normally start an SIP for a 10 year period and then if he sees consistent underperformance for a period of 3 years, he exits the fund. Thereby, the entire purpose of investment is lost.
Composition of Goal Based Funds
Goal – based funds are similar to balanced funds as they allocate their portfolio between equity and debt components depending on the goals to be achieved. For e.g., the allocation to debt will be in the range of 60% to 100% in a normal retirement plan while, the equity component will be ~ 40%. “UTI Retirement Benefit Pension” was the first goal-based plan in the mutual fund industry, launched in 1994. This was followed by a series of children’s plans and one more retirement scheme from Franklin Templeton Asset Management. After a gap of 7 years, fund houses are once again showing interest in launching these products, as can be seen from the two new schemes launched in 2011 namely, Fidelity India Children’s Plan and Peerless MF Child Plan. There are more funds in the pipeline - Tata Retirement Fund, IDFC Retirement Fund and ICICI Prudential Lakshya Fund. (Check out Upcoming Mutual Fund Offers).....(Read More)
Investors needs to be patient with their mutual fund investments, however, the moment the markets start behaving randomly, all this seems to fall on deaf ears.
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