Conservative Hybrid Funds

Capital Diversification

Conservative mutual funds invest in equity and debt instruments, giving you exposure to various assets. In addition, these funds primarily focus on investing in debt instruments, reducing the level of risk, and the exposure to equity instruments gives better returns.

Low Volatility

Since conservative mutual funds prioritise investing in debt instruments, you are not exposed to many changes in the market. In addition, the risk level is significantly lower than investing in equity funds, making these funds ideal for investors with a low level of risk tolerance.

Stable Returns

Conservative mutual funds' diversified nature enables you to earn returns even in volatile market conditions. Hence, this advantage of conservative hybrid mutual funds draws the interest of low-risk tolerance investors to invest in these funds.

Better Returns

The diversified nature of conservative mutual funds enables you to earn better returns than fixed deposits. Since these funds invest in equity and debt instruments, the debt securities protect the principal, and the equity ensures capital growth.

Flexibility

In the case of conservative mutual funds, the degree of flexibility is high for the funds since the investor can at any time manage its holding between the selected class of assets. Whenever the condition of the market is not favourable for your investment portfolio, you can easily manage it as per your needs.

High Post Tax Returns

If you hold the conservative funds for a tenure of 3 years or more, it helps you get eligibility for indexation benefits. In such scenarios, as an investor, you need to pay less amount of tax on your total returns.

Fund’s Performance

When choosing a conservative mutual fund, you must check its performance. You must compare its benchmark and peers to analyse the performance. It will help you select the best conservative money market funds according to your preference.

Investment Horizon

Before investing in conservative mutual funds, you must understand your investment horizon and goals. If you can achieve your financial goals within three years, then it is a short-term goal. However, if you require more time to achieve your goals, then it is a long-term goal. When you plan to invest in conservative mutual funds, your investment horizon must be around three years, making it ideal for achieving short-term goals.

Investment Risk

When you start investing in conservative mutual funds, you must consider your risk tolerance level. Conservative mutual funds have a lower level of risk than other hybrid mutual funds. However, if you want to minimise the risk, you must invest in mutual funds with low dependency on equity instruments.

Expense Ratio

Before investing in these funds, you must go through the terms and conditions of such funds. It will help you understand the expense ratio and choose the best conservative investment fund with the lowest expense ratio.

Fund Manager

A fund manager for your investment portfolio is a crucial consideration in terms of the performance of funds. As they are the ones deciding asset allocations of your funds, it has a direct impact on your returns. Therefore, choosing an experienced fund manager, with a good track record is suggested to get better returns on your money.

Implications of Taxes

Tax implication on your conservative funds generally depends on the investment’s holding period. So if you are planning to hold the investment for 3 or more years, your capital gains will get taxed as per rates of income tax slab. Hence, considering the indexation benefit, choosing this fund as per your financial plans becomes crucial.

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