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Income Funds Allure

These funds can generate better returns than bank deposits

I would like to invest Rs 50,000, which fund should I invest in? This investment is for two years.

It would be better to invest in income funds. If certain amount of risk is something you can take, then invest in MIPs. Under this category a small part of your investment will go into equity, which would help you to get returns that are better than bank deposits and the downside risk is very less. Since you are investing for the first time, and that too for a shorter period, it would be better to go for MIPs.

Which one would be a better option: A diversified equity fund, or a tax-saving fund, for a 3-year investment period?

It would be preferable to invest in a diversified equity fund that doesn’t have a lock-in period because the tax saving fund binds you. You can’t get out and there is no distinct advantage. Although there are claims that in a tax-saving fund the fund manager has a very clear premise and the money will remain invested for three years and therefore, they get better chance to invest and raise profits. Hence they can give better performance. But there is no example as such to prove this point. Therefore, it’s better to invest in a good open-ended diversified fund which is not a tax saving fund, since your intent is not about tax-saving. Therefore, in case the fund doesn’t respond, you will have the option to leave.

I have invested in ICICI Prudential Infrastructure, SBI Magnum and HDFC Top 200. Are they good for the long-term or short-term?

All three funds are good. Rather than investing in all of them in a lump-sum, try investing in them on a regular basis.

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