SBI Magnum Children’s Benefit Plan
SBI Magnum Children’s Benefit Plan is a debt-oriented hybrid mutual fund by SBI Asset Management Company (AMC). As a solution-oriented mutual fund, this scheme invests in debt instruments such as government bonds and money market instruments as well as in equity and equity related instruments. It is an actively managed mutual fund with up to 25% of the total asset allocation in equities.
It is to be taken into account that the investors of this scheme will not receive any dividend income but get the best benefits of compounding.
Objectives of the scheme
As a Child Education Plan by SBI, this scheme is designed to help the individuals plan and invest for the future financial requirements of their children. Some of its key objectives are:
- It is a conservative hybrid fund which seeks to derive inflation protected income
- Helping in long-term wealth creation for child’s education purpose
- Generating attractive returns
- Providing regular income opportunity to the investors and capital appreciation with an actively managed portfolio
Related Article: Best Hybrid Mutual Funds 2020
Portfolio Concentration
SBI Child Education Fund has invested largely into debt alongside exposure to mid-cap stocks and lower-rated bonds. This is the key to the lower volatility of the scheme, while providing a balance with respect to prospective returns.
Here is a tabular representation of the returns accrued by this scheme in the last 3 and 5 years:
| Returns | 1- Year Returns | 3- Year Returns | 5-Year Returns |
| Fund | -7.53% | 4.73% | 8.47% |
| Benchmark | -2.67% | 4.675 | 5.54% |
- According to the above mentioned returns, the fund may have failed to give positive returns in 1 year period but it has outperformed its benchmark in the 3 and 5 year period.
- There is a minimum 70% allocation of assets into debt which protects the portfolio against market volatility and by picking up mid-cap equity stocks, it intends to generate double-digit returns.
- The risk in SBI Magnum Children’s Benefit Fund is spread over the 29 stocks in which it has invested.
- The top five debt holdings for this fund are: Government Securities (16.68%), Power Finance Corporation (8.43%), State Bank of India (8.10%), National Bank Agriculture and Rural development (7.95%) and Syndicate Bank (6.35%)
- The top five equity holdings are: ICICI Bank (1.58%), Narayana Hrudayalaya (1.48%), Ahluwalia Contracts (1.22%), Tata Metaliks (1.16%) and CSB Bank (1.10%)
- An appropriate combination of debt and equity classes can help investors in achieving their financial goals. For instance, a combination of 25% equity & 75% fixed income assets can generate a balance between risk and return that is ideal for an investor with relatively low risk tolerance.
Also Read: Best Equity Mutual Funds 2020
Who should Invest in this fund?
- Investors with moderate to high appetite can invest in this fund for at least three years to accrue satisfactory returns
- Individuals who want to shift a part of their equity investments to relatively safer assets (debt instruments) can consider SBI Magnum Children’s Benefit Plan
- Someone who is willing to invest in mutual funds to create wealth for their child’s education and regular income can invest in this fund
Taxation
- When there is more than 65% asset allocation in equity assets, the short-term capital gains (redeemed before one year) are taxed at 15%. Long-term capital gains (redeemed after 1 year) are taxed at 10%
- When there is less than 65% asset allocation in equity assets, returns are taxed according to the income tax slab in case the units are redeemed before completion of 3 years of investment. And, in case the units are redeemed after 3 years, returns are taxed at 20% with indexation benefits
- No tax is paid as long as the investor continues to hold the units
Frequently Asked Questions
Q.1: Which is the best fund for child education?
Ans: There are several child education plans formulated by different Mutual Fund companies. It is suggested that you should invest in a combination of debt and equity funds (mid cap funds) or multi-cap mutual funds if you are working for your child’s future. According to historical returns of the last 3 years, the best five child education funds are: Kotak Standard Multicap Fund, SBI Magnum Multicap Fund, SBI Magnum Children’s Benefit Plan, Mirae Asset Emerging Bluechip Fund and Invesco India Growth Opportunities Fund
Q.2: Why should I buy SBI Child Education Plans?
Ans: SBI’s Child Education Plans are especially designed to give investors the best opportunities to create wealth for their child’s future requirements. Its funds such as SBI Magnum Children’s Benefit Fund and SBI Magnum Multicap Fund are most popular amongst investors with similar financial goals. They have outperformed their benchmarks and have successfully delivered double digit growth. However, you can analyse other plans and choose the best which serves your investment objectives.
Q.3: What is the right time to buy a Child Plan?
Ans: Planning and investing for a child’s future is very important and must be done with utmost attention to external factors such as risk, returns, etc. These types of investments should be initiated as early as possible. Investors are suggested to focus on building a long-term investment (at least 10 years) to generate good returns and create wealth.
Q.4: What are things to consider while buying a Child Plan?
Ans: While investing in a child plan, an investor is suggested to keep the following things in consideration- 1. Investment Horizon, 2. Risk Involved, 3. Asset Class which is majorly invested in, 4. Past Performance of the fund, 5. Fund Management and 6. Taxation and Cost benefits
Q.5: What are the types of Child Plans?
Ans: Some of the most popular child investment plans are: Unit-linked Child Plans, Insurance Plans, Endowment Plans and Money Back Plans