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Conservative Fund

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March 08, 2017

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Certain conservative funds invest only in fixed income securities, while some variants invest in both categories – fixed income and equities.

A conservative fund option usually has investments in debt instruments and / or equities that fit a certain specification like a steady track record of dividends or large market capitalizations. Conservative funds are launched by unit-linked insurance plans / ULIPs, mutual funds and other investment firms.

Conservative funds can fall in one of two categories. They invest in:

  1. fixed income securities like bonds, government securities, money market instruments
  2. stocks / shares of companies that are blue chips with consistent track of dividends, large market capitalizations or such criteria
  3. smaller companies or small caps

How Does a Conservative Fund Work?

The investment strategy is guided by the principle of capital preservation with enough risk-taking investments to generate adequate growth without endangering the overall fund.

While a conservative investment strategy can have many definitions, it primarily aims at beating inflation with additional growth. In other words, it looks at providing positive inflation-adjusted returns.

The investment guidelines vary across ULIPs / mutual funds and investors are informed of this through product literature / company websites.

Who Is It Ideal For?

For an investor with low risk appetite and long-term goals like saving for child’s education, retirement planning or child’s marriage, conservative funds are an option either on a standalone basis or in combination with other conservative investment options.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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