Selection of appropriate mutual fund depending upon investment period, goal and risk is a tedious task. For a 4-year investment goal, hybrid funds are ideal if moderate risk and potential for better returns are priorities, while short-duration debt funds suit those who prefer stability and lower risk.
Hybrid Funds:
- Hybrid funds invest in both equity and debt, offering a blend of capital growth and income stability.
- They suit medium-term goals like a car purchase, wedding or other sizeable expenses, and offer diversification to balance risk and reward.
- Conservative hybrid funds lean heavily towards debt (75–90% debt), while balanced and aggressive hybrid funds have a higher allocation to equities for growth.
- Choose hybrid funds if aiming for moderate returns and can tolerate some market volatility over 4 years.
Short-Duration Debt Funds:
- These funds invest in bonds and other fixed-income securities with maturities of 1–3 years, making them stable and less sensitive to interest rate changes.
- Short-duration debt funds provide predictable, modest returns and high liquidity, making them suitable for investors who prioritize capital safety over growth.
- Recommended for investors who cannot tolerate equity market volatility and prefer steady income.
Which Should Be Prioritized?
- If comfortable with market ups and downs and desire for higher returns: Hybrid funds.
- If low volatility, predictable returns and capital protection are most important: Short-duration debt funds.
Preference between these fund types depends on risk tolerance and return expectations. Prioritize hybrid funds for balanced growth, and short-duration debt funds for utmost stability and minimal risk over a 4-year horizon.