What do you expect when you invest in a capital protection oriented fund? Protection for your capital and for your money to not lose value, right? The capital market regulator, Securities and Exchange Board of India (Sebi) prohibits from assuring capital or returns, but allows to devise strategies that minimise the risk of a loss.
But is simply getting your money back enough? If, after having invested for 5 years, your fund gives nil returns, capital protection doesn’t mean much, does it? What most people are signing on for is protection of capital along with some returns, ideally more than what fixed deposits give.
These funds provide superior downside risk protection during a market downturn but offer limited upside during market upturns. They are suitable for conservative investors with a low risk appetite. These funds provide even the most conservative investors an opportunity to invest a small part of their portfolio in equity, thereby giving them the scope to participate in equity market upturns.
Investments under the Capital Preservation Strategy are Skewed towards Debt.
The debt investments are suggested in such a manner that returns from it ill increase to the nearly to level of initial invested capital.At the same time the equity portion of the Portfoliois suggested with the aim to provide a filip to the overall Portfolio value.
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