Are you are eagerly interested in specified investment plans like Retirement Plan, Children’s Gift Plan etc. Though they are “Solution Oriented Schemes”They are targeted on “Investors Emotions”
What are “Solution-Oriented”Schemes?
As Per SEBI’s classification, These are targeted at specific goal as per the ‘Investment Objective” of the scheme. Generally, These are “Hybrid” Schemes which invest partly in equity and debt
They are two types of Hybrid Schemes- Conservative(25-30% in equity and 70-75% in debt) and Aggressive(75% in equity and 25% in debt).
Solution-oriented schemes falls in either of the two. Investors may select them as per their risk-appetite.
How do Fund Houses Lures Customers–
They promote their products by attaching”Emotions” of the investors. They tries to lure the investors by promising huge returns at the end of the tenure, but if you actually observe them closely, How many of them achieved the targets?
Even though, These funds are targeted on a specific goal, not all of them achieved the corpus, if you closely observe the Past Track Record. Instead you may invest in “Diversified Equity Schemes” as they are diversified and have good track record.
Investors must note that Both Solution-oriented Schemes and Diversified Equity Schemes are traded on “Stock Exchange”and there would be no difference in returns as they are traded in equity and debt market proportionately.
Compare the past performance of both “Diversified Equity” schemes and “Solution -Oriented” schemes and take decision.
Another drawback of solution oriented schemes are- They have compulsory lock-in of at least 5 Years and/or up on attaining specific period(18 Years for Childrens Gift, 60 Years for Retirement Plans)whichever is earlier.
If you need urgent cash, You can’t redeem until the lock-in period of 5 Years or attaining specified age. The lock-in period may be decided at the time of investment(either 5 Years or 18 Years for childrens gift,5 Years or 60 Years for retirement). Once you gave instructions to the fund house to lock-in, the funds are locked and you can’t redeem in between. Be Aware of this!