Conservative hybrid funds offer a balanced approach to investing. It blends fixed-income securities with a portion allocated to equities. This combination provides steady income with capital appreciation while reducing risks.

They suit investors who are looking for moderate returns and low risk. Let's look into it in detail how these funds are a good opportunity for new investors.

What are Conservative Funds?

Conservative mutual funds invest in low-risk assets like bonds. They give priority to stability and income generation. They aim for steady returns while reducing volatility. This makes them suitable for investors who are cautioned or near their retirement.

For new investors, they offer a less volatile entry into the market compared to pure equity funds. They spread risk and provide stability by diversifying across asset classes.

These funds often have a higher allocation towards fixed-income securities. They provide lower returns and have lower exposure to equities compared to aggressive funds. 

Features of Conservative Funds

Here are the top features of conservative funds. 

1. Low Risk: Conservative funds give priority to reducing risk. They invest in assets like bonds and stable stocks. They aim to protect investors' capital from losses.

2. Income Generation: These funds focus on generating regular income for investors. They mainly invest in debt securities.

3. Diversification: These funds spread money across different asset classes. They aim to reduce the overall risk in the portfolio and improve stability.

4. Best for Investors who are Conservative: These funds are for investors who want income with low risk.

How Does a Conservative Mutual Fund Work?

These mutual funds pool money from various investors to invest in a diversified portfolio of low-risk assets is how conservative mutual funds operate. These assets are chosen by the fund managers.

Fund managers manage this portfolio by actively changing asset allocation and investment strategies in order to meet specific goals; meanwhile, they reduce risks and limit volatility. This fund provides steady income through interest payments and dividends while emphasizing the preservation of capital.

You can invest in these funds if possible both through an asset management company and an online investment platform like Dhan. To begin investing, simply register on Dhan, complete the KYC procedure, and get started.

Taxation Rules of Conservative Mutual Funds

Conservative mutual funds are taxed as debt funds:

  • Capital gains on investments held for less than three years are subject to short-term capital gains tax, or STCG. It is taxed based on the tax slab and added to the investor's taxable income.
  • Investments held for more than three years are subject to long-term capital gains tax, or LTCG. A 20% tax rate is applied to profits, including benefits from indexation.

Final Words

Conservative funds are safe mutual funds and can build wealth in the long run. Now that you have understood everything about conservative mutual funds, you can start your investment journey today. They help you balance the overall portfolio. You can choose Dhan and start investing in a wide range of hybrid mutual funds with ease in a few minutes.