Mutual Funds: From retirement to children's higher education, Solution-Oriented Mutual Funds are the sure solution to every worry..

There are many types of mutual funds. Usually, when we think of investing in mutual funds, names like large-cap, mid-cap, small-cap, or balanced funds usually come to mind. We often choose the fund whose returns look the best. But do you know that there is a special category of mutual funds, which is not just created to give 'returns', but to give 'solutions' to the biggest dreams of your life?

The name of this special category is - Solution-Oriented Funds. This is a special category of Mutual Funds. They are designed to meet a specific financial goal. Let's know about this special fund of the MF.

What are solution-oriented funds?

These are a type of hybrid mutual funds, which invest money in both equity (stock market) and debt (government bonds, FD). But their biggest identity is that they are designed for a specific goal. According to SEBI rules, there are mainly two types of these:

Retirement Fund: Their sole goal is to create a large fund for your retirement.

Children's Fund: Their goal is to save money for your children's future major expenses, such as their higher education or marriage.

What makes these funds the most 'special'?

5-year lock-in period - This is the feature that makes solution-oriented funds completely different from all other mutual funds. In these funds, your money gets locked for at least 5 years. This means that you cannot withdraw your money for 5 years. In the case of retirement funds, this lock-in is for 5 years or your retirement age (usually 58-60 years), whichever is earlier.

Why is this lock-in period beneficial?:
This lock-in period is not a penalty, but a boon for you. It saves you from the two biggest mistakes:

Panic in market fluctuations
Often, when the market falls, we withdraw our money in fear and incur losses. Due to lock-in, you are not able to do this, which protects you from market volatility.

Indiscipline
Many times we break our long-term investments for small needs. This lock-in prevents you from doing this and ensures that the money you saved for the big goal (retirement or children's education) is used for that purpose.
How do these funds work?
These funds keep changing their asset allocation (ratio of equity and debt) according to your age and risk-taking ability. When you are young, they invest more of your money in equity so that you get better returns. As your goal comes closer, they gradually withdraw money from equity and shift it to safe debt so that your fund remains safe.

For whom are these funds beneficial?

For young investors – If you want to save money for retirement at the age of 25–30 years, then this is the right option.

For parents – Those who have young children and need a big fund for higher education after 15–18 years.

For long-term planners – Those who want to invest with discipline and do not plan to withdraw money in between.

Calculation of returns

Solution-Oriented Funds are usually made up of a mix of equity and debt.

In the last 10–12 years, their average return has been 10–12% per annum.

If an investor does a SIP of ₹10,000 per month for 20 years and gets an average return of 11%, then the fund value can be around ₹80 to 81 lakh.

Benefits
Long-term compounding longer the time, the greater the benefit.

Discipline – the lock-in period prevents you from withdrawing money in between.

Specific goal achievement – ​​like children's education or retirement.

Tax benefit – long-term capital gain tax is only 10% (above 1 lakh).

Disadvantages
Low liquidity – difficult to withdraw money if needed in between.

Returns not guaranteed – these are market-linked.

Low flexibility – you may get stuck in changing funds or changing goals.

Who should avoid?

Those who may need money in the short term.

Those who like investment flexibility.

Those who have very low risk tolerance.

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