Hybrid funds come in all shapes and sizes, and there are schemes for aggressive and conservative investors. Since these schemes invest in both equity and debt securities in varying proportions, it is safe to say that there is a hybrid fund for every type of investor.
Many investors with a lower risk tolerance prefer the conservative approach to investments, which prioritizes the preservation of capital over returns. While most low-risk investors opt for debt funds, Conservative Mutual Funds offer them a great investment opportunity. Here, we will explore Conservative Funds and discuss some important aspects of these funds.
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Conservative Mutual Funds have a portfolio of debt and equity securities with a relatively lower risk. They primarily invest in debt securities (around 75-90%), with a small portion allocated to equity and equity-related instruments (around 10-25%). The small exposure to equity allows these schemes to earn better returns than pure debt schemes. Further, conservative funds usually invest in high-quality debt securities and large-cap stocks.
These funds endeavour to offer regular income as well as capital appreciation while focusing on capital preservation. They have lower exposure to equities as compared to aggressive funds and have a clear focus on offering inflation-beating returns.
The main features of a conservative fund are as follows:
Since they invest mostly in debt securities, these mutual funds are unaffected by market fluctuations. People who seek to maximize their returns while minimizing risk can consider investing in such funds.
Moreover, these funds do not offer returns as much as equity funds and more riskier funds.
They suit investors who have a lower risk appetite while investing.
These funds are known to perform well in the moderate to long-term period.
Conservative mutual funds are balanced funds that provide higher returns with lower risk. The percentage of debt securities in these funds ranges between 75 and 90%. The remainder of the fund's assets are placed in low-risk equity securities, allowing it to achieve higher returns.
The goal of debt securities is to preserve capital while also delivering fixed-interest income. Market-related instruments, on the other hand, contribute to both fixed and capital gains. The conservative mutual leverages these investments to give potentially inflation-beating returns to investors.
You can invest in these funds through an intermediary or as an Asset Management Company.
One such dependable option to choose from can be Groww. All you need to do is sign up on the official application, complete the KYC process and start investing.
You can invest in conservative mutual funds for the benefits mentioned below:
They Carry Minimal Risks
These mutual funds do not invest in high-risk instruments and prioritize capital preservation as the underlying investment concept. Other debt funds, such as liquid funds and extreme short-term funds, may provide better returns than a conservative mutual fund while being safer than most of the other mutual funds.
They Can Offer Market Exposure
These funds invest in low-risk debt securities and market-related instruments. This balanced exposure and return profile may help new investors gain confidence.
Offers a Fixed Source of Income
Conservative mutual funds in India serve to balance portfolios that are heavily weighted towards high-risk investments. They are balanced funds that aid in risk distribution and portfolio diversification.
Diversification
They are balanced funds that assist in distributing risk and diversifying portfolio investments.
These funds are taxed as debt funds:
Q1. What is conservative funds meaning?
Conservative mutual funds are investment vehicles whose portfolios will be highly concentrated on safe tools such as debts and securities.
Q2. Who should invest in conservative funds?
Investors who have a low-risk appetite can invest in such funds.
Q3. What are the taxation rules of a conservative fund?
Conservative funds are taxed as debt funds. STCG is levied on profits from investments held for less than 3 years. LTCG applies to investments held for more than 3 years. Profits are taxed at 20%, including indexation advantages.
Q4. Are conservative funds entirely risk-free?
Conservative funds invest 75-90% of their total assets in debt and money market instruments, with 10-25% in equity (usually large-cap companies). As a result, they are seen as riskier than pure debt funds.
Q5. What is the investment horizon to see good outcomes with conservative funds?
In order to see good returns, you will have to stay invested for at least 3 years.
Disclaimer - Mutual Fund investments are subject to market risks; read all scheme-related documents carefully.
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