In investing, time horizon plays a crucial role in deciding where to put your money basis your financial goal. For example, for a long-term goal like retirement, the investments should be more growth focused. In the meanwhile, a 3-year goal, “is near-term and urgent, hence, the first thing to look at is capital protection,” says Arijit Sen, Sebi-registered investment advisor, co-founder merrymind.com
“The interest rate is an important component, but the primary requisite is that the capital remains intact,” he adds.
“For such goals, one must go for debt funds, if he wants to invest in mutual funds. The primary reason for this is market volatility.”
Here are the funds that you invest in for a 3-year goal:
Bond Funds and Dynamic Bond Funds: For such investments, the investors can actually go for higher maturity funds, it can be a bond fund, it can be a dynamic bond fund.
Credit calls should always be avoided in these cases, Sens warned, reiterating about the Franklin Templeton fiasco. “In case there’s a default, because of a segregated portfolio the investor will not be able to withdraw that money.”
These funds provided returns between 6-8%.
Funds to invest in:
- Under low duration fund category, you can stick with Kotak low duration fund
- Under ultra short term, you can go with HDFC ultra short term
- “And for people who are willing to take a bit of risk when it comes to the risk return concept. Then he can move to the ICICI all season bond funds,” he suggested
Arbitrage Fund: The investor can also look into arbitrage funds. Though it is 65% in equity, but the mechanism is way different from hybrid funds. They buy from one market to sell in another. There’s a gap between these two prices, which is basically gain.
Approximately, the investor will gain about 5 to 6% in an arbitrage
Funds to invest in:
- Kotak Arbitrage Fund
- IDFC Arbitrage Fund
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