Sukanya Samriddhi Yojana vs SBI Magnum Children’s Benefit Fund: Know Which Investment Option Is Better

Be it marriage or child rearing, financial planning plays an important role in achieving a future goal. Often, people continue to accumulate money in their savings accounts for these purposes, which yield a much lower interest rate compared to other government schemes or schemes offered by public sector banks. Financial experts advise that people should not only plan their future goals but also invest wisely to get better returns. Sukanya Samriddhi Yojana and SBI Magnum Children’s Benefit Fund are the two schemes aimed at the welfare of children.

Sukanya Samriddhi Yojana

The Ministry of Finance launched the Sukanya Samriddhi Yojana in 2019. Sukanya Samriddhi Yojana (SSY) is a small savings scheme for the benefit of the girl. This government-run scheme is available in post offices or government-run banks. This account can be opened in the name of a girl younger than 10 years old. A maximum of two Sukanya Samriddhi Yojana accounts can be opened per family. A third account is only allowed on the birth of twins/triplets. The Sukanya Samriddhi Yojana account can be opened with a deposit of Rs 250 per year and the maximum deposit can be up to Rs 1.5 lakh in a year. The term of an SSY account is 21 years or until the girl marries after the age of 18. However, money can only be deposited into the account for 15 years. The scheme offers an interest rate of 7.6 percent. Under Article 80C, one can also claim income tax benefits on the investment amount. The interest earned under the scheme is tax-free.

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SBI Magnum Child Benefit Fund

SBI Magnum Children Benefit Fund is a solution-oriented mutual fund and was launched in 2002. It offers the investors two options, one is a savings plan and the other is an investment plan. SBI Magnum Children Benefit fund Saving Plan is a conservative hybrid fund that allocates large funds to debt and debt-related instruments and a portion is invested in equities. Since its inception, the scheme has yielded a return of more than 10 percent. Pankaj Mathpal, founder and director of Optima Money Managers, said the fund has grown more than 5.3 percent in the past year and more than 12 percent in the past three years.

On the other hand, the investment plan of the SBI Magnum Children Benefit fund is an aggressive hybrid fund. “An aggressive hybrid fund will allocate 65 percent of its assets to equities and equity-related instruments. As of August, the asset allocation of more than 82 percent of the SBI Magnum Children Benefit fund has been in equities. The scheme has delivered a return of 13 percent in the past year. Since its inception in September 2020, the CAGR has been just over 56 percent. This also offers no tax benefits,” Mathpal said.

Also, the short-term or long-term capital gains tax applies to the income of the scheme.

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Which fund is better?

Supposing if you want to invest and build a corpus for your son, you cannot do it under the Sukanya Samriddhi scheme, then you should go for the SBI Magnum fund. Mathpal said that the SBI Magnum Children’s Benefit Fund offers a better return in the long run compared to the Sukanya Samriddhi scheme. “Since stocks offer better returns in the long run, one can opt for the SBI Magnum Children’s Benefit Fund Investment Plan. However, the choice between the Sukanya Samriddhi scheme and SBI Magnum Children’s Benefit Fund depends entirely on a case-by-case basis,” said Mathpal .

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