Do you know that cost of acquiring an engineering degree in 2010 and 2020 is estimated to rise to Rs 8.30 lakh and Rs 21.50 lakh respectively in comparison to Rs 3.20 lakh presently and Rs 1.0 lakh in 1990?

Similarly the cost of acquiring a medical degree is estimated to be around Rs 12.90 lakh and Rs 33.60 lakh respectively in comparison to Rs 5.0 lakh and Rs 0.50 lakh respectively.

Finally the cost of acquiring a MBA degree is slated to increase to Rs 6.20 lakh and Rs 16.20 lakh for the same period as compared to Rs 2.40 lakh in the year 2000 and Rs 0.30 lakh in the year 1990.

If this worries parents and children, then they have something new to look at and bank on for their future financial needs, thanks to HDFC Mutual Fund. With a view to generate long term capital appreciation for investors, HDFC Mutual Fund has launched the HDFC Children’s Gift Fund, its sixth scheme since inception. An open ended balanced scheme, the offer opened on 25 January 2001 and closes on 2 February 2001. The fund has not set itself any target for mobilising funds, but aims at garnering more account holders instead.

Set up in June 2000 and promoted by India’s premier housing finance company, HDFC Mutual Fund has launched 5 schemes since inception, all open ended. These are HDFC Growth Fund, HDFC Balanced Fund, HDFC Income Fund, HDFC Liquid Fund and HDFC Tax Plan 2000.

Replying to a question raised by domain-b Mr Milind Barve, managing director, HDFC Asset Management Company Ltd, said, " We have not set ourselves any specific target in terms of amount, but are looking at enrolling about 20,000 customers through the scheme instead. We believe the market is on the look out and ready for a product like this."

With the minimum amount having been fixed at Rs 3,000 and in multiples of Rs 1,000 thereafter, HDFC mutual fund expects to end up garnering at least Rs 6 crore by the time the scheme closes. Anyone wishing to make a gift to a child of less than 18 years of age is eligible to subscribe to the units but the subscription must be held for a period of at least three years. The list of probable investors includes resident or non-resident adult individuals, HUFs, companies, bodies corporate, public sector undertakings, partnership firms and association of persons among others. While the person making the gift will not be entitled to any tax benefits, the fund has sought to make the scheme attractive by providing resident unit holders a personal accident insurance cover equivalent to ten times the face value of the units. This will be subject to a maximum amount of Rs 3 lakh per unit holder. The insurance premium will be borne by the asset management - company.

Announcing the launch Mr Barve said, "In this age of rising inflation and taxes, it is increasingly difficult for parents to meet the financial goals for their children’s secure future. The children’s gift fund has been specifically designed to cater to the investment needs of the parents by encouraging them to invest early and save for their child’s future. HDFC Mutual Fund is committed to delivering a wide range of investment options to investors backed by superior computer service." The children’s gift fund scheme offers two plans to investors.

One is the investment plan or the equity oriented plan wherein 60 per cent of the investments will be deployed in equity and equity related instruments and the rest 40 per cent in debt and money market instruments. The other is the savings plan or the debt oriented plan wherein 80 per cent of the investments will be deployed in debt and money market instruments and 20 per cent in equity and equity related instruments.

To a question raised by domain-b Mr Sanjoy Bhattacharyya, chief investment officer of HDFC Mutual Fund said, " We will invest in a diversified portfolio to minimise risks and there will be no specific sector allocations because of their higher risk profile." He specified that investment in any particular sector will not exceed 15-20 per cent of the total portfolio and no scrip will get more than 10 per cent of the total portfolio amount. In addition, Mr Barve stated that investments will be company- and scrip-specific and not sector-specific. Citing example he said Asian Paints was classified as FMCG by some, paints by others and as chemicals by the rest. What sector then Asian Paints could be classified to?

Mr. Barve clarified that the choice of shares to be invested will rest on three basic parameters. One the company must have predictable cash flows, two it must be run by honest people and three it must be predictably growth oriented. He said, " We want to run business for long term just like our parent HDFC, which has been in business right since 1977". He said our approach continues to be conservative coupled with commitment, which is essentially long term in nature.

Mr Barve sounded confident about the prospects of the Indian mutual fund industry. He said though the corpus of the Indian mutual fund industry had reached Rs 99,000 crore, it still had a long way to go as it was still way behind the bank deposit figure of Rs. 880,000 crore. He said in contrast the American mutual fund industry’s corpus stood at three times that of bank deposits and therefore the Indian mutual fund industry had a long way to go. He said mutual fund products in India had gained larger credibility and acceptability now, thanks to some steps taken by the Securities & Exchange Board of India or Sebi.

Mr Barve also stressed on the need to start saving and investing early and on the need for investing for long term in fixed income securities. He said "the power of compounding" worked excellently when investments were on a long term basis in fixed income securities. Citing an example he said Rs 5,000 saved and invested every month for 15 years would compound to Rs 25.2 lakh at a12 per cent rate of return, Rs 33.80 lakh at 15 per cent rate of return and Rs 45.90 lakh at 18 per cent rate of return.

Giving another example he said parents of a 2-year old child began saving and investing in fixed income securities, an amount of Rs 5,000 per month. After five years if they stop making further investments, having invested Rs 3 lakh, the amount would grow to Rs. 39.80 lakh at the end of 15 years based on a return of 15 per cent compounded monthly. In contrast, if the parents of a 12-year-old child started saving and investing in fixed income securities at the same amount per month, the amount of Rs. 3 lakh saved in five years would grow only to Rs. 8.90 lakh. In other words a delay of ten years cost the latter Rs 30.90 lakh!