Mutual Funds- Where to invest for 2 or 3 years

wealthfund While Indians have been traditionally conservative in their decisions (which is wise sometimes), they are also beginning to open up. As the financial market matures, the investment options and plans are available in plenty. Investors, who are planning to invest only for a period of 2 or 3 years, may opt for these mutual funds:

 Liquid Funds

  • They have the lowest interest rate risk among debt funds as mutual fund houses generally invest in fixed income securities with short maturity.
  • Liquid funds have no lock in period and money can be withdrawn with 24 hours on request.
  • They have very low risk. The maturity of the instrument can go up to 91 days. Unlike liquid funds, other debt funds have securities with longer maturities and so are more influenced by interest rate changes and market movement.
  • Liquid funds are available in different plans like growth plans, daily dividend plan, weekly dividend plans and monthly dividend plans.
  • Dividends received under Liquid plans are not taxed at the hands of resident individual investors.

Ultra-Short Funds

  • The ultra-short term focuses on very short-term instruments in the fixed-income space.
  • Ultra-short bond funds offer investors greater protection against interest rate risk than longer-term bond investments.
  • Since these funds have very low durations, increases in the rate of interest will have a lesser impact on their value, vis-a-vis a medium or long-term bond fund.
  • It invests most of the money in call money and other short-term instruments, offering good liquidity.

Equity Fundswealthfund

  • Equity funds have widespread diversification, with very small initial investment. This is helpful in ways that if a stock drops at the exchange the other stocks can make up for the loss.
  • These fund offer capital appreciation to investors. With the increasing growth of the company, the market price of the stock increases, leading to capital appreciation for the investors.
  • Investors can avail regular income in the form of dividends. These companies usually pay out regular dividends in good & bad economic times, typically paid quarterly.
  • Equity funds are highly liquid in nature. This means that an investor can sell their stocks whenever they want to.
  • No brokerage is charged for the service.

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