I am a low-risk passive investor and looking for an option to invest for my child's higher education and my retirement with a time horizon of 15-20 years. Could you suggest some conservative investment options?
- Gomati
Equity savings are low-risk funds for conservative investors. These funds have about one-third of their assets invested in equity, arbitrage and debt each.
However, since you have an investment horizon of 15-20 years, you can opt for balanced funds as well, which invest about 65 per cent of their assets in equities. You can choose one-two balanced funds and keep investing in them systematically via SIPs. Equities can be volatile for a short duration but over a long horizon, they can generate good inflation-adjusted returns for investors, while debt yields are likely to go down further. Individual inflation is very different from the one disclosed by the government every year. The Consumer Price Index (CPI) inflation is different from the inflation of an individual's cost of living. For instance, the government on an aggregate level may declare inflation for a year as 5 per cent. However, since this is just an average, not all things will become dearer by the same rate. Now things that you require on a daily basis may be much more expensive and your cost of living for the year may increase by 8 per cent. Hence, you need your investments to grow by a minimum of 8 per cent for the year and not by 5 per cent to prevent inflation from eating up on your capital.
Hence, balanced funds for a time duration of 15-20 years will be a good investment option and help you accumulate the corpus that you shall require for your goals or even more. The greater the amount you accumulate than what you need, the higher is the margin of safety. This margin of safety helps you take care of any unplanned expenses. Since you have a fairly good amount of time in hand, you can take chances with balanced funds and earn a higher return on your investments without being too aggressive. Also since you are a passive investor, you should not be worried about the daily movement of your funds.
