One day my Life Insurance agent approached me and handed over to me policy details for my child’s future plans. This insurance policy gave me an insurance coverage to Rs 10,00,000. This Child Plan will require annual premium payment of Rs 52,000 for next 18 years and return will be affected at the end of 18th year, 19th, 20th, 21st, 22nd and 23rd year. I was supposed to take the decision of buying this policy in a matter of one week. The return matrix was as below:
| Year | Return | Cumulative Premium Paid @ Rs 52,000/year |
Return in Percentage per annum |
| 18th | Rs 15,50,000 | Rs 09,36,000 | @ 5.1% p.a. |
| 19th | Rs 01,40,000 | Rs 09,36,000 | @ 5.4% p.a. |
| 20th | Rs 01,40,000 | Rs 09,36,000 | @ 5.6% p.a. |
| 21st | Rs 01,40,000 | Rs 09,36,000 | @ 5.8% p.a. |
| 22nd | Rs 01,40,000 | Rs 09,36,000 | @ 5.9% p.a. |
| 23rd | Rs 04,00,000 | Rs 09,36,000 | @ 6.7% p.a. |
| Total | Rs 25,10,000 | Rs 09,36,000 |
I being a big fan of equity linked investments was reasonably confused with this insurance policy. The tenure of this policy was nearly 18 years plus and in this holding period I was tuned to believe that equity linked investment will give me much higher returns (in tune of 12% per annum). But the point of consideration was the certainty of returns. The above insurance scheme was sure to give me a minimum return of 6.7% per annum, but there was no equity linked investment scheme that could guarantee returns with such certainty. As this money was planned for my child’s future, I wanted to be more sure before taking any decision. I decided to do the study myself and dig into the history of returns given by mutual fund companies.
My first step was to know what type of mutual funds are available in line with my investment goal (child plan). With my limited knowledge of equity market, I was sure that I will certainly not for small cap or even mid cap linked equity plans. Though my investment knowledge was telling me that with investment horizon of more than 18 years, probably riskier investment can give me mind blowing returns. But my mind was telling me to take it easy as this money was for my child. So I decided to narrow down my research to the following types of mutual fund alone.
| Sl | Fund Category | Approx. 5 Year Return by top CRISIL ranked funds | Comparative Risk Rating |
| 1 | Large Cap Fund | ~ 7.10% | High |
| 2 | Banking and Finance Fund | ~ 11.47% | Medium |
| 3 | Balanced Fund | ~ 08.57% | Medium |
| 4 | Long Term Debt Funds | ~ 07.24% | Low |
| 5 | Monthly Income Plan (Aggressive) | ~ 07.62% | Low |
LARGE CAP FUND
I then researched and generated Top 10 Large Cap Funds and their annualized returns
| SL | Fund Name | CRISIL | AUM | 3YR (%) | 5YR (%) |
| 1 | ICICI Pru Focused Bluechip Eqty (G) | Rank 1 | 3,809.54 | 15.5 | – |
| 2 | Fidelity India Growth Fund (G) | Rank 1 | 292.65 | 13.9 | – |
| 3 | Fidelity Equity Fund (G) | Rank 1 | 3,001.08 | 14 | 6.1 |
| 4 | UTI Opportunities Fund (G) | Rank 1 | 1,422.50 | 15.2 | 11.6 |
| 5 | HDFC Top 200 Fund (G) | Rank 2 | 11,189.82 | 12.4 | 9.8 |
| 6 | HDFC Index – Sensex Plus Plan | Rank 2 | 83.78 | 11.4 | 5.9 |
| 7 | DSP-BR Top 100 Equity – RP (G) | Rank 2 | 3,119.27 | 11.1 | 7.6 |
| 8 | Franklin India Bluechip (G) | Rank 2 | 4,565.20 | 12.9 | 7 |
| 9 | JPMorgan India Equity Fund (G) | Rank 2 | 289.6 | 11.5 | 3.1 |
| 10 | SBI Magnum Equity Fund (G) | Rank 2 | 507.62 | 12 | 5.7 |
| Average Return | 7.1 |
BANKING AND FINANCE FUND
My next step was to research and generated Top 10 banking Funds and their annualized returns. My logic says that the banks and financial institutions have a very sound knowledge of money management. Hence the returns they are giving in long term horizon will be sure and above average. As there was no CRISIL ranking available for research about these banking funds hence I decided to rank the fund on basis of their Asset Under Management (AUM) figures.
| SL | Funds | CRISIL | AUM | 3YR (%) | 5YR (%) |
| 1 | Reliance Banking Fund (G) | Not Ranked | 1,671.49 | 20.4 | 14.9 |
| 2 | UTI Banking Sector (G) | Not Ranked | 358.29 | 17.2 | 10.3 |
| 3 | Sundaram Fin-Serv. Opp.-RP (G) | Not Ranked | 207.87 | 13.3 | – |
| 4 | ICICI Pru Bkg & Fin Serv-RP(G) | Not Ranked | 143.94 | 17.3 | – |
| 5 | GS Bank BeES | Not Ranked | 53.3 | 16.8 | 9.2 |
| 6 | Religare Banking Fund -RP (G) | Not Ranked | 41.22 | 18.8 | – |
| 7 | Reliance Banking Fund – IP (G) | Not Ranked | 33.09 | – | – |
| 8 | Sahara Bkg & Fin. Services (G) | Not Ranked | 20.36 | 17.4 | – |
| 9 | Kotak PSU Bank ETF | Not Ranked | 12.05 | 12 | – |
| 10 | Reliance Banking ETF | Not Ranked | 11 | 17.1 | – |
| Average Return | 11.5 |
BALANCED FUND
As per my investment logic, this type of fund was my instant choice. But I decided to evaluate other investment option. My Child’s plan should give me capital protection against inflation and also a small capital appreciation. A good mix of debt and equity in the portfolio of balanced funds gives me exactly this possibility.
| SL | Fund | CRISIL | AUM | 3Yr (%) | 5Yr (%) |
| 1 | HDFC Prudence Fund (G) | Rank 1 | 6,040.55 | 17.6 | 10.8 |
| 2 | HDFC Balanced Fund (G) | Rank 1 | 630.44 | 18.9 | 11.8 |
| 3 | Tata Balanced Fund (G) | Rank 2 | 329.4 | 15.4 | 8.6 |
| 4 | Can Robeco Balance (G) | Rank 2 | 185.82 | 14.7 | 9.2 |
| 5 | Reliance RSF – Balanced (G) | Rank 2 | 571.16 | 13.1 | 12.4 |
| 6 | ICICI Pru Balanced Fund (G) | Rank 2 | 334.11 | 13.6 | 5.2 |
| 7 | ICICI Pru E & D-Volatility Adv. (G) | Rank 3 | 156.38 | 12.8 | 6.1 |
| 8 | FT India Balanced Fund (G) | Rank 3 | 208.09 | 9.8 | 5.8 |
| 9 | Birla Sun Life 95 Fund (G) | Rank 3 | 519.08 | 12.3 | 8.3 |
| 10 | DSP-BR Balanced Fund (G) | Rank 3 | 647.3 | 11.5 | 7.5 |
| Average Return | 8.57 |
LONG TERM DEBT FUNDS
These funds are great for your long term capital protection. Given a choice I will certainly go for this type of mutual fund after balanced funds. The main advantage of this fund is above average returns (considering it is debt linked fund) and almost risk free.
| SL | Fund | CRISIL | AUM | 3Yr (%) | 5Yr (%) |
| 1 | Principal Income – Long Term (G) | Rank 1 | 41.99 | 7.3 | 8.3 |
| 2 | SBI Dynamic Bond Fund (G) | Rank 1 | 1,256.41 | 8.6 | 4.8 |
| 3 | UTI Bond Fund (G) | Rank 1 | 824.47 | 7.5 | 7.7 |
| 4 | Birla SL Short Term Fund (G) | Rank 2 | 742.27 | 7 | 8.4 |
| 5 | SBI Magnum Income Fund (G) | Rank 2 | 54.87 | 7.1 | 5.8 |
| 6 | IDFC Dynamic Bond -RP A (G) | Rank 2 | 419.59 | 6.3 | 9.2 |
| 7 | HSBC Flexi Debt Fund – RP (G) | Rank 2 | 95.01 | 6.8 | – |
| 8 | Religare Active Income-RP (G) | Rank 2 | 2.32 | 6.4 | 5.5 |
| 9 | BNP Paribas Bond Fund -RP (G) | Rank 2 | 325.62 | 7.3 | – |
| 10 | HSBC Income Fund – IP (G) | Rank 2 | 33.31 | 6.8 | 8.2 |
| Average Return | 7.24 |
MONTHLY INCOME PLANS (AGGRESSIVE)
These monthly income plan funds are focused to maximum returns with minimum of risk. My objective is more or less the same. The only difference is I do not need that monthly income to support my living, I will simply re-invest the income to maximize the returns. The reason why this MIP has been tagged as aggressive as its portfolio consists of approx 16% of equity. So in long term it is possible to get better returns than long term debt funds.
| SL | Fund | CRISIL | AUM | 3Yr (%) | 5Yr (%) |
| 1 | HDFC MIP – LTP (G) | Rank 1 | 5,878.88 | 9.6 | 9.5 |
| 2 | Reliance MIP (G) | Rank 1 | 3,617.77 | 10 | 11 |
| 3 | Can Robeco MIP (G) | Rank 2 | 293.37 | 8.5 | 8.6 |
| 4 | DSP BlackRock MIP Fund (G) | Rank 2 | 229.39 | 8.4 | 7.8 |
| 5 | Birla SL MIP II-Wealth 25 (G) | Rank 2 | 213.1 | 7.6 | 6 |
| 6 | ICICI Prudential MIP 25 (G) | Rank 2 | 481.51 | 8 | 7 |
| 7 | Kotak Monthly Income Plan (G) | Rank 3 | 39.43 | 7.6 | 4.5 |
| 8 | Tata MIP Plus Fund (G) | Rank 3 | 74.49 | 7.6 | 6.6 |
| 9 | UTI MIS – Advantage Plan (G) | Rank 3 | 693.06 | 7.5 | 7.5 |
| 10 | HSBC MIP – Savings Plan (G) | Rank 3 | 241.77 | 8 | 7.7 |
| Average Returns | 7.62 |
Conclusion
I will repeat my statement that I am a big fan of equity linked investment plan. So though banking and finance fund has medium risk level so it is impossible to ignore its long term advantages and certainty of returns. So 35% of my investment will go in this fund for sure. The second best returns will be given by my favorite balanced fund, so my 50% investment will be in this fund. Balance 15% should be allocated to MIP (aggressive plan) Fund. It will give more stability to my portfolio without compromising the returns. So in a nutshell I can say that my expected returns will be approximately 9.5% per annum. (Note: I plan to invest Rs 5,000 per month for my Child’s Future Planning)
| % Weight | Rs per month | Fund Category | Approx. 5 Year Return by top CRISIL ranked funds | Comparative Risk Rating |
| 35% | 1,750 | Banking and Finance Fund | ~ 7.10% | Medium |
| 50% | 2,500 | Balanced Fund | ~ 11.47% | Medium |
| 15% | 0,750 | Monthly Income Plan (Aggressive) | ~ 08.57% | Low |
|
Average Return |
~ 9.5% |
Manish, Investor, Blogger, Thinker & Engineer. He is blogging since last 5 years. He understood that doing 9 to 5 job is not a great way of achieving financial independence. So he decided to invest his money to achieve financial independence. Through this blog he is creating and publishing contents that will raise awareness among his readers about investment of money.
