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Kindly suggest mutual funds schemes for my daughter who is 17 years old

I am state government officer, I have invested in many mutual fund schemes. My daughter is 17 yrs old. Kindly suggest mutual funds for her She doesn't have PAN CARD. Can I invest in her name without PAN CARD?

Dec 31, 2015 by Sara Abhyankar, Mumbai  |   Mutual Fund

Let us first address, the second part of your question. Since your daughter is a minor, you can make mutual investment in her name with you as a guardian. Since, she is a minor her PAN is not required for Know Your Client (KYC) purposes, but you need to furnish your PAN details for KYC. If you have child bank account for her, you should mention that in the bank details of her investment. If you do not have a child / minor bank account for her, you can use your own bank account, but you should ensure that you either add her to your bank account or open another account for her and update the bank details in your mutual fund investment, when she turns into major.

Now coming to the first part of your question, the choice of schemes for your child will depend on your investment goals and investment horizon. If you have a short term investment horizon, 3 years or less, for your daughter, e.g. for her higher education, you should opt for income funds or other debt oriented schemes to ensure that your daughter’s investment has minimal risks. While income funds can be volatile in the very short term, few months to a year, they can give very good returns over the next 3 years or so. In the last 3 years, long term income funds have given around 11% returns. Long term capital gains tax for an investment holding period of over 36 months in income funds is 20% after allowing for indexation benefits. The Reserve Bank of India has reiterated its accommodative stance as far as interest rates are concerned. If interest rates are on a downward trajectory, income funds can give good returns over a 3 year investment horizon. You can look up the performance of top income funds by going to our MF Research section. If you have a slightly longer term investment horizon and can afford to take small amount of risk for your daughter, monthly income plans are also excellent investment options. These funds have about 20 – 30% equity allocation and the 70 – 80% debt allocation. The debt allocation ensures safety and low volatility, while the equity allocation can give a kicker in returns. However, these funds are slightly more risky than income funds. You can look up the performance of top income funds by going to our MF Research section.

If you have a longer investment horizon, 5 years or more, for your daughter, e.g. for her wedding or other financial goals, you can invest in good diversified equity funds. The outlook for Indian equities is very bright, in view of improving fundamentals in Indian economy and early signs of improvement in the corporate sector. Over a sufficiently long investment horizon, you can potentially earn excellent returns once the secular bull market resumes in India. You can look up the long term performance of top diversified equity funds by going to our MF Research section.

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