In the ever-evolving landscape of financial planning, parents are increasingly turning to mutual funds Systematic Investment Plans (SIPs) to secure their child’s future. But can minors really partake in these investments? Let’s delve into the rules and processes involved.
Can Minors Invest in Mutual Funds through SIP?
Yes, they can. To initiate the process, certain documents are required, aligning with the Association of Mutual Funds in India (AMFI) guidelines. These include the minor’s school-leaving certificate or mark sheet, birth certificate, and a relationship document.
Mutual Fund: How to Invest under a Minor’s Name?
The key here is for a parent or legal guardian to take the reins. Paperwork substantiating the relationship with the minor is crucial. Natural guardians must provide proof of the relationship, while court-assigned legal guardians need to supply a copy of the court order.
Guardians should also furnish their PAN, bank account details, and complete KYC data. Despite the guardian handling payments from their account, the minor maintains exclusive ownership, and the account remains non-joint with no provision for adding a nominee.
Investing in Indian Stocks as a Minor
Beyond mutual funds, minors can dip into the world of Indian stocks. However, their guardians oversee DEMAT and bank accounts. It’s essential to note that minors cannot engage in equity intraday, equity derivative trading, or currency derivative trading. They are limited to equity delivery trades.
Transitioning into Adulthood: What Happens at 18?
Until the child turns 18, only parents can operate the minor’s account. Upon reaching adulthood, the transition involves filling out the minor-to-major (MAM) form and submitting it with necessary documents, including the minor’s PAN and KYC details.
During this transition, financial transactions are restricted. However, dividend payments continue, either deposited into the unit holder’s bank account or reinvested in the portfolio as applicable.
In conclusion, while minors can indeed participate in mutual funds SIPs and stock investments, it’s a collaborative effort with their guardians steering the financial ship until they come of age. This strategic approach not only secures the child’s financial future but also instills valuable financial discipline from an early age.
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