After the recent re-categorisation and rationalization of mutual fund schemes which aimed to reduce the hassles of investors in respect of fund selection, there came up a new category of mutual fund schemes called solution oriented mutual fund schemes. These schemes have been devised to provide a financial solution to some life-stage events and hence include retirement and child plans in particular.
Features of solution-oriented mutual fund scheme
These schemes have a lock-in period of 5 years or the amount cannot be withdrawn before the attainment of majority by the child whichever is earlier. Same is the case with retirement funds that come with a lock-in of 5 years or until the subscriber retires.
Suitable for whom?
The investor class that do not take expert suggestion and do not look for far-fetched return from their portfolio can invest in this category to meet different financial goals. Conservative investor class can meet the objectives of those with finding easy solutions.
Also, those investors who get easily trapped to the volatile market conditions can look to invest in these funds. Here in the discipline sets in as the investor cannot get away with the investment when the market sentiments turn bearish.
The disadvantage with this category of fund is that the investor needs to remain invested even in case of underperformance and hence the better alternative given the objective in mind is the new aggressive fund option with an almost similar portfolio with same equity exposure.
Also if experts are to go by, investor after having locked in funds in this product specific scheme should not exit just after the lock in and instead remain invested for a longer time to recoup gains.