I need good returns but do not want to take unnecessary risk.
AskedDepending on the risk appetite of the investor and the duration that the investor wants to invest for, the fund can be selected.
As the duration involved is 2-3 years the investor should preferably invest in:
Debt fund is a mutual fund which invests most of the money collected from investors into fixed income instruments like corporate bonds, government bonds (both state and central), bonds issued by banks, certificate of deposit, treasury bills etc. These mutual funds are best for investors who are risk aversive in nature, do not wish to invest in stock market and expect fixed return on investment.
Balanced funds are investment instrument, where an asset management company invest the money gather into both debt and equity. These are diversified mutual funds having perfect balance between risk and returns on investment. It is suggested to invest in these funds for an ideal investment duration of 2-3 years.
Large Cap Funds are generally the ones with huge market capitalisation. Large cap funds are known to offer stable and sustainable returns over a period of time, but might be outperformed by small and mid cap funds, which have higher risk exposure.
The risk involved in a large cap funds is very low as compared to mid cap and small cap funds, since these funds invest in companies with huge corpus and an established brand. Large cap companies are very stable and have been running for a long time.
The following funds can be invested in:
· SBI Magnum Gilt Fund Long Term
· ICICI Prudential Balanced Fund
You want to invest for 2-3 years and earn good returns and are not willing to take unnecessary risk. Going by these factors, an investment in large cap equity fund or a balanced fund will be most suitable for you and will help you in achieving your goals.
You can choose between these 2 depending on your risk appetite and age
Large Cap Equity Funds
Large cap equity funds usually give returns ranging from 13-16% annually if an investor remains invested for 2-3 years. Risk in these funds is moderately high. These funds are suitable for investors who can take moderate risk and want to earn more than the large cap indexes and protect their investments from high inflation.
Balanced Funds
Balanced funds usually invest in both debt and equity asset classes and are meant for investors looking for mix of safety, income and modest capital appreciation. The debt component of balanced funds vary from 25-50% and remaining is invested in equity.
These funds are safer than large cap equity funds and give returns ranging from 10-14% in 2-3 years time horizon. These type of funds have advantages of both equity and debt as they are safer than pure equity funds and at the same time give returns more than pure debt funds.
Some of the top performing funds are :
TATA Retirement Savings Fund
Franklin India Balanced Fund
L&T India Prudence Fund
Aditya Birla Sun life Balanced 95 Fund
DSP Blackrock Balanced Fund