As I am not acquiring any returns from liquid funds, should really I begin investing in hybrid funds?
—Pankaj Phadnis
Liquid funds are normally employed by investors to park their emergency corpus and/or close to term money flow wants. Safety and liquidity are the crucial concern of investors, even though returns take a back seat. Hybrid funds give some exposure to equities, which normally outperform most asset-classes more than the lengthy term. However, equity is more volatile than most asset classes with even possibility of a capital loss more than the brief-term.
The extent of equity exposure in any hybrid fund depends on the category to which it belongs. Investors can opt for from conserv-ative hybrid funds (equity allocation can variety from 10-25%) to aggressive hybrid funds (65%-80%). Also, the fixed-revenue exposure differs from that of liquid funds present-ing duration, credit and liquidity danger to the investor. Hence, danger-return profile of hybrid funds is significantly distinctive from that of liquid funds. Evaluate the fund’s suitability with regards to your danger-appetite, investment horizon and fitment in the general portfolio.
I have been investing in a SIP for 4 years. Though I do not will need any cash now, should really I redeem some of the gains, in case markets go down?
—N P Singh
Equities are more volatile than most asset classes with even the possibility of a capital loss more than the brief-term. However, as the holding period increases, the danger of capital loss diminishes. You should really continue to remain invested if you have a lengthy investment horizon, and can even look to allocate additional when any corrections take location as these present an chance to get units at less expensive rates. Over longer horizons, equities have a tendency to outperform most asset classes.
Investors should really stick to their lengthy-term strategic asset-allocation, based on their danger appetite and not attempt and time the markets. You can contemplate re-balancing your asset-allocation back to the target weights in case of any important drift due to market place movement. Withdrawing any corpus would decrease your portfolio worth to the extent of the quantity withdrawn and you could drop out on any subsequent gains on the withdrawn corpus that would have accrued till the finish of your investment horizon.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to