All you need to know about solution-oriented schemes

The recent circular from the market regulator SEBI for the categorisation and rationalisation has created a fresh new basket for the equity mutual fund schemes. According to the circular, all open-ended schemes will be classified under broad categories like equity, debt, hybrid, solution-oriented and others which will be further sub-categorised into 36 asset classes including 10 equities, 16 debt, 6 hybrid schemes, 2 solution-oriented and 2 others. The solution-oriented schemes are one of the important types of schemes for long-term goal planning.

Solution-oriented schemes include the schemes like childcare/gift or retirement schemes. Earlier these schemes were considered as regular equity or balanced schemes however with the recent circular these are classified under the solution-oriented schemes. These are open-ended schemes which have a minimum lock-in period of 5 years.

These types of schemes are particularly helpful for the investors who are willing to create their retirement and children education or marriage corpus with mutual funds but lack in selecting mutual funds and balancing investment. These funds are more attractive in terms of returns and investment than that of the plans offered by the insurance companies.

On the liquidity front, these schemes score less than that of the other equity schemes due to the compulsory lock-in of 5 years. It is good for the investors which maintain the discipline and the cushion to save the goal from bad decisions in the times of volatility so the new investors who are planning the long-term goal can use these funds as an avenue. As per SEBI circular for recategorization and classification, below mentioned schemes are involved in the category.