I want to invest Rs 35,000 in mutual funds, Rs 5,000 of which should go in dividend yield funds. The rest I want to invest in debt funds. My investment horizon is of 2-3 years. Please suggest good funds for me. Also tell me if this strategy is good or should I invest in a good balanced fund?
-Sushant
This is a highly appropriate time to invest in fixed income funds. You shouldn’t ignore bank deposits either, which are also offering good returns currently. You should pick a fixed income fund, or a fixed maturity plan (FMP) or a bank fixed deposit depending on your tax status.
However, you shouldn’t consider a balanced fund because such funds have higher exposure to equities. Balanced funds will be riskier vehicles than what you seek because they invest up to 70 per cent of their assets in equities, and only 30 per cent in debt. Your asset allocation goal will be achieved with greater simplicity if you invest in an MIP, which ordinarily invest 10-15 per cent in equities and the rest in fixed income.
This article was originally published on February 07, 2012.
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