Broadly speaking, there are two ways of investing – the conservative way and the aggressive way. In between, there is also a moderate way and its different shades. Every investor is unique in terms of his or her distinct financial objectives, risk-taking capacity, expected returns from investment, etc. Typically, individuals are driven by emotions and every individual’s investment decisions are influenced by various emotions and the situations they face. But naturally, then they are very attentive and concerned about investing their hard-earned money in any of the investment instruments.
As such, any untoward event such as default by a company on its debt re-payment in case of fixed income investment or a deep market drawdown in case of equity investment can end up in a big dent in investment value. Conservative investors have a lower risk appetite and the desire to earn stable and consistent returns even if it means lower returns. Contrary to this, aggressive investors have a higher risk appetite and desire to earn higher returns from their investment even though it means capital loss. Moderate investors wish to have the exposure of both aggressive as well as conservative investments and desire higher returns along with stability in their portfolios.
There are various investment options available for each of the above-mentioned investors. Aggressive investors can invest in equity and equity-related instruments; conservative investors can invest in debt, fixed income or money market instruments; and investors willing to invest in both of them can invest their corpus blending both equity instruments as well as debt and fixed income instruments. In this article, we are going to look at the investment options that a conservative investor has.
There are various low-risk investment instruments available that deliver stable and consistent returns to their investors such as debt mutual fund, bank fixed deposit, public provident fund, relief bonds, government securities, national savings schemes, post office monthly income scheme, among others. Out of all the options available we are going to take a look at the two most popular investment instruments among conservative investors, which are debt mutual fund and public provident fund. Both of them have unique characteristics, benefits, and limitations.
Debt Mutual Fund
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