When it comes to long-term wealth creation and getting better inflation-adjusted returns, initiating a Systematic Investment Plan (SIP) in equity funds is strongly preferred if compared to fixed income instruments. Investors who plan to invest in equity funds, whether large-cap, mid-cap, or small-cap, should take note of the following. According to the statistics from S&P Dow Jones Indices as of June 30, 2021, 86.21 percent of Indian Equity Large-Cap Funds underperformed the S&P BSE 100 in the previous year. According to the research, in the previous three years, 86.67 percent of large-cap funds underperformed the S&P BSE 100, and in the last five years, 82.72 percent of large-cap funds underperformed the benchmark. For the one-year period ending June 2021, 57.1 percent of mid/small-cap and 53.7 percent of equity-linked savings schemes or ELSS funds underperformed their respective benchmarks.
Also, 82.72 percent, 76.19 percent, and 69.57 percent of Indian equity large-cap, ELSS (tax saver funds), and mid-/small-cap funds underperformed their respective benchmarks over a five-year period ending in June 2021, respectively. As the data are not indicating a green sign and where the current stock market is soaring at a record high, it is advisable to start investing in Conservative Hybrid Funds which primarily allocate their 75% of assets in Fixed Deposit-like securities and the rest in equity. In the current market scenario, this fund category can be a good bet for you as they can offer you more returns than other debt instruments like fixed deposits along with growth to your portfolio. Here are the two best conservative hybrid funds based on CRISIL's ranking of "No 1" (as of 30th June 2021) that can be considered by risk-averse investors to investing for at least 3 years in 2021 to get modestly steady income through a SIP in debt and money market instruments, as well as capital growth through minimal exposure to equity and equity-related securities.
Canara Robeco Conservative Hybrid Fund
Canara Robeco Mutual Fund established this Conservative Hybrid mutual fund scheme, which has been in operation for the past 8 years. The fund's expense ratio is 0.61 percent, which is lower than the expense ratio charged by most other funds in the same category. The fund currently has a 22.80% equity allocation and a 69.70% debt exposure. Canara Robeco Conservative Hybrid Fund Direct-Growth returns in the previous year were 16.77 percent, according to Value Research, and it has generated 10.56 percent average annual returns since its inception.
The financial, automobile, healthcare, services, and technology sectors make up the majority of the fund's equity holdings. National Bank For Agriculture & Rural Development, Tamilnadu State, Housing Development Finance Corpn. Ltd., Gujarat State, and GOI are the fund's top five holdings. CRISIL has given the fund a "No 1" rating, Value Research has given it a 5-star rating, and Morningstar has given it a 5-star rating, indicating the fund's previous performance strength during market peaks and troughs.
As of 6th October 2021, the fund has a Net Asset Value (NAV) of Rs 82.22 and has an Asset Under Management (AUM) of Rs 896.35 Cr. The fund charges an exit load of 1% if units of more than 10% are redeemed within 12 months of the purchased date. SIP in this fund can be started with a minimum amount of Rs 1000 per month.
LIC MF Debt Hybrid Fund
This fund invests predominantly in debt instruments with marginal equity exposure. This Conservative Hybrid mutual fund scheme was founded by the fund house LIC Mutual Fund in the year 1998 and is a medium-sized fund of its category. The fund has a 2.27 percent expense ratio, which is higher than most other Conservative Hybrid funds.
As of August 31, 2021, the fund has a 24.75 percent equity allocation and a 75.24 percent debt exposure. The recent one-year growth returns of the LIC MF Debt Hybrid Fund were 12.13 percent, and it has generated an average annual return of 8.51 percent since its inception. The equity part of the fund is largely invested in the technology, financial, fast-moving consumer goods, energy, and healthcare sectors. Reserve Bank of India, GOI, Infosys Ltd., ICICI Bank Ltd., and Larsen & Toubro Infotech Ltd. is the fund's top five holdings.
The fund has received a "No 1" rating from CRISIL, a 3-star rating from Value Research, and a 3-star rating from Morningstar, reflecting the fund's consistent historical performance in terms of generating gains. The fund has a Net Asset Value (NAV) of Rs 71.58 and an Asset Under Management (AUM) of Rs 83.85 Cr as of October 6, 2021.
If units worth more than 12 percent are redeemed within 12 months after the acquisition, the fund imposes a 1% exit load. SIPs in this fund can be commenced with as little as Rs 1000 per month.
|Period||Scheme||CRISIL Hybrid 85+15 - Conservative Index*||CRISIL 10 Year Gilt Index**|
|The above returns are as of 31st August 2021. Source: licmf.com|
2 High Rated Conservative Hybrid Funds To Start SIP In 2021
Based on CRISIL's ranking of No.1 and past performance, here are the 2 conservative hybrid funds that you can consider to start SIP in 2021 for at least 3 years.
|Funds||1 mth returns||6 mth returns||1 Yr returns||3 Yr returns||5 Yr returns|
|Canara Robeco Conservative Hybrid Fund||0.11%||8.19%||16.77%||13.90%||9.90%|
|LIC MF Debt Hybrid Fund||-0.21%||5.82%||11.93%||9.97%||7.46%|
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