This was the new category of mutual funds doing rounds in the last 6 months.
Nobody in the industry bothered to explain the actual impact of what happens when there is a drop in equities. All of them said a majority stake would be in Debt instruments but minority would be in equities so your capital is protected.
The big assumption which makes an ASS out of every body is that interest earnings on debt instruments are constant while the equities provide the required pep.
Wrong on both counts AMC’s. Inflation has made RBI raise its interest rates and they have invented newer ways to tinker around banks various ratios. Equities returns are dropping to less than 34% from the last 3 years data which was at a prime of 128
So here is my version of a capital protected scheme:
a) Invest in a post office GMIS ( Group Monthly Investment Scheme). This currently yeilds the honourable 8% p.a.
b) Every month the interest earned can be invested in equity markets SIP by SIP [ Systamatic Investment Plan ]
c) At the end of tenure your capital is protected and the interest portion is speculated in equities. Since this is for a 6 year tenure you for sure are a winner.