Indeed nobody was prepared for such a pandemic that took on a toll on all from salary cuts to furlough to even job losses and such distressed hours remind us of planning ahead to let our ends meet in such unprecedented times.
So, here we tell you some mutual fund types that are less risky for probably tiding over the next crisis or may be for your larger financial goals, if you are willing to take a cut on your discretionary expenses and want to capitalize on the rupee cost averaging benefit that comes with investing in mutual funds via SIP route.
Also, after a recent crash in markets despite the steady recovery for some time, we may get fund units at a better NAV.
Here are some of the less risky mutual funds you can still consider investing:
1. Liquid Funds:
Even as the crisis has hit mutual funds hard as was eminent with the recent closure of schemes of Franklin Templeton, one can always take a bet on lowest risk carrying liquid funds. These are typically debt funds and regulations require funds to invest only in securities with a maturity of up to 91 days.
Other key aspects of liquid funds
1. Investment can be in T-bills, commercial papers, CDs or certificate of deposits and inter-bank call money market
2. Interest rate is the lowest among all the debt funds in such funds and is also looked up to as alternative to bank savings account with better returns at par with benchmark yield on bonds.
3. NAV calculated for a year and not as with other funds that is computed on every other business day.
4. Also, one can use them to create a contingency fund and helps provide cushion against volatility faced by equity markets.
2. Index funds:
Even with not much insight into the stock markets, one can very well reap gains mirroring the index say the Nifty 50 or the different sectoral indices for that matter. This is after adjusting for tracking error and expense ratio. Being passively managed they do not cost high in terms of the expense ratio. Also, if the sector index in which the fund is invested into will perform or replicate returns similar to the index and that may not be true in case of individual stocks because of company-specific fundamentals.
3. Aggressive hybrid schemes:
Herein don't go by the term aggressive in literal sense and if you have the slightest of risk appetite and want to see your money grow overtime bet on this scheme. In such schemes 65-80% is invested in equity while the rest is parked in debt. And for the purpose of taxation, it qualifies as equity scheme.
Here why it is suggested safe is that it stabilizes returns during bouts of volatile stock markets.
4. International Schemes:
This is another option that typically invests in overseas markets and by taking the route one can diversify one's risk and when the world markets have been experiencing hard sell-off, the bet can mitigate to a certain degree to which the Indian markets are exposed. As per a Value Research report, calendar 2019 was the best for such funds.