It makes sense for investors, who are heavily invested in equity mutual funds, be it largecap, small midcap or flexi cap, to start moving money to Hybrid Funds that have a conservative approach.
Why you should start SIPs in conservative hybrid funds?
As an SIP investor, the one thing that you want to do is generate returns and protect your capital. Those who have invested in SIPs largely through largecap, midcap, small cap and flexi cap funds have gained whopping returns in the last few years.
Now, with the Sensex at nearly 60,000 points, you are buying into an SIP at a whopping 50,60, 70 and maybe 100 per cent higher NAV than what was prevailing a year ago. It’s time to now look at hybrid funds, which have a conservative approach, in a sense they might invest moderately through equity, with a large exposure to debt. Conservative hybrid funds invest roughly a quarter of the money in equity shares and the rest in bonds. The Sensex at nearly 60,000 points is offering very little value and most stocks have gone-up significantly.
A few hybrid funds to consider for starting SIPs
We see little point in investors continuing their SIPs in 100% equity mutual funds, as you would continue to be buying units at a higher NAV. Here are a few conservative Hybrid funds to consider, which are rated No 1 and No 2 by CRISIL in the conservative hybrid category.
|CRISIL rating||1-year returns|
|Canara Robeco Conservative Hybrid Fund||No 1||14.76%|
|LIC MF Debt Hybrid Fund||No 1||8.67%|
|Kotak Debt Hybrid||No 2||19.64%|
|HSBC Regular Savings Plan||No 2||12.44%|
|Franklin India Debt Hybrid Fund||No 2||13.38%|
Once markets fall, there maybe an opportunity to change the approach again and move money to pure equity funds. A recent report by one of the top brokerages in the country suggested that the Sensex is trading a premium of almost 20% to long-term averages. This means equities are turning expensive and with interest rates across the globe headed higher, we might see equities continue to under perform, given where the markets are.
Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion.