What are best mutual fund options for grandchildren? Here is what expert suggests for wealth creation

Are you planning a one-time investment for your grandchildren and looking for options that can generate maximum returns by the time they turn 18 or older? Here is what an expert suggests, as reported by ETWealth.

According to Rushabh Desai, Founder, Rupee With Rushabh Investment Services, as a grandparent, you can invest in mutual funds for your grandchildren. In India, the process is well-defined but requires coordination with the parents who will act as guardians/custodians.

The expert also said that one cannot claim an income tax deduction for investments made in the name of their grandchildren. The good news is that any amount of money gifted by grandparents to their grandchildren is exempt from gift tax.

The expert also highlighted that the grandparents have an investment time horizon of 12 to 14 years, which is long enough to take risk and maximise returns. You will not be able to maximise the returns with minimal risk.

The expert said the best three options are: pure equity mutual funds portfolio consisting of 2-3 flexi cap funds (high risk, high returns); hybrid mutual funds portfolio consisting of 2-3 dynamic asset allocation funds (moderate risk, moderate returns); and, 50% pure equity and 50% hybrid mutual funds portfolio.

Looking at the long-time horizon and since the money is for the grandchildren, the expert recommended that the prudent approach would be to go with the first option which will help in maximising the returns, but you can opt for either of the options you like