Conservative Mutual Funds are the hybrid funds they invest in both the equity and debt securities in different proportions that make it hybrid as it is investing in dual securities in varying proportions. As this mutual fund has a portfolio of both the debt up to 75 to 90% and equity securities up to 10 to 25%, it makes it relatively lower risks. In contrast to debt schemes the savings in equity schemes makes out better returns. These funds offer regular income and lumpsum returns at the end of the tenure. Basically, these funds invest in large cap stocks and high-quality debt securities, and when compared with the aggressive funds these have their focus on equity related instruments. As these conservative hybrid funds invest in large cap stocks, it is the better option for the lower risk averse people, also for the retirees who wishes for regular income and a good return after maturity of the scheme. As they offer higher returns and have low risks these schemes these are ranked better than the pure debt fund investments.
What are the Factors to be considered before investing in conservative funds?
As these funds have hybrid portfolio of investment in both debt and equity securities also as they choose the large cap stocks, they have lower risks than the pure debt funds.
Compared to other debt securities they offer higher returns. This condition can be occurred when the fund manager selects the large cap stocks but could also be riskier while choosing mid cap or small cap funds. So, investor must analyze before investing into these funds to gain higher returns.
Conservative funds charge some fund management fees, investor must select the scheme with lower fund fee or expense ratio to gain more returns.
Depending upon investment amount and other terms Short term capital gain tax and long-term capital gain tax is applicable, respectively.
What are the advantages of Conservative Funds?
As the conservative funds shows the dual portfolio of investment in both the equity and in the debt securities these funds have sound advantages, the below are the list of variant advantages of these investments-
- Lower Risks
- Higher returns
- Regular Income
- Safe investment option
- Short tenure, etc.