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What's your opinion on capital protection oriented funds?

Dhirendra Kumar evaluates capital protection funds and explains how investors should look at them

Transcript: They are closed ended funds with a 3-5 year term. They invested 15-25% in equity, based on the assumption that if the equity money disappears, 75-85% invested in fixed income will grow to give your money back. These are very conservative investments.

If you are a long term investor, do not look at them as an option. Look at an MIP, a balanced fund, an equity income fund or even an all equity fund. If you are investing for the next 15-30 years, start with a balanced fund and move to a multicap fund over the next 3-5 years. Make your investments through SIP.

If you have a lumpsum to invest, say 10 lakh rupees, never invest in one go. Spread it over the next 15-18 months. Eliminating the possibility of getting a market high is very important for an investor when he's getting started. Capital Protection funds are very low yielding, they merely provide psychological relief.

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