I am a 62-year-old retired person. I wish to invest about Rs 1 lakh with the idea of capital appreciation for about three years. My problem is I cannot track the performance of my portfolio on regular basis. Where should I invest?
—S.K. Misra
For a person of your age, who wants capital appreciation over long-term, there's no better option than opting for one or two good equity-oriented hybrid fund. These funds have the ability to deliver decent returns over the long-term. Three- and five-year annualised returns of 26.58 per cent and 12.59 per cent, respectively (November 19, 2004), demonstrate this. Usually, equity-oriented hybrid funds maintain a 60:40 equity:debt allocation. While equity provides the push when equity markets surges, the bonds give a sense of stability to the overall portfolio in case equities turn tail.
These funds are also safe bets over long-term due to low volatility. The standard deviation of equity-oriented hybrid funds has been one-third less than that of the actively managed equity funds. This attractive risk-return contour makes them a perfect investment destination for the cautious investors like you. The investment here also doesn't needs to be tracked on a regular basis due to low volatility.
Though there are over 30 such funds to choose from, HDFC Prudence and FT India Balanced have always been among the top performing funds in the category. In the past three years, while HDFC Prudence has delivered an annualised return of 40.27 per cent, FT India Balanced has given a good return of 30.52 per cent (annualised). Hence, we would advice you to park your money in either or both of the above mentioned funds. We are sure you will end up achieving your goal over a three-year period.
This article was originally published on November 23, 2004.
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