31 MARCH, 2022

Insurance is an essential part of any financial plan. It protects your immediate successors in case of your untimely demise and if you live a long life, the payout at the end of the plan could be large. An endowment policy fund, apart from providing life coverage, helps you get a good payout at the end of the insurance term. This corpus can be used to fund a part of your retirement savings or for buying a house. A lot of investors have chosen to invest in insurance for long-term goals.

Investors who have trusted insurance companies know the value of building a corpus for long-term goals. A major reason for choosing insurance is that it helps you to financially protect you and your loved ones. However to generate wealth which beats inflation, you should look beyond traditional forms of investment.

When we talk about maximizing wealth creation, we are not talking about taking undue risks. All we want to say is that you need to invest in products that beat inflation in the long run. A very good product that may help is a Debt Hybrid Fund.

Debt Hybrid Funds are conservative Mutual Funds that invest around 75-80% of their portfolio in government bonds, treasury bills, corporate debt like debentures and other similar low-risk instruments. Investing in such instruments, primarily backed by government, reduces the chance of default significantly. The debt investments generally generate steady income and ensure that your capital is mostly protected. The balance 20%-25% of the portfolio is invested in equities such as large cap/blue chip companies with good financial records. The equity investments give a boost to your capital gains.

A combination of debt and equity ensures that your capital is less threatened and the chances of losses are minimal compared to other aggressive funds. These funds overall are not greatly affected by volatility in the market, and that is why they are great for investors because they may secure a better return without increasing risk substantially.
 

Fund Name

Equity Allocation

1 Year

3 Years

5 Years

10 Years

Kotak Debt Hybrid Fund

24.79%

11.44%

11.62%

8.96%

9.97%

SBI Conservative Hybrid Fund

21.93%

10.90%

10.30%

7.91%

9.55%

NIFTY 50 Hybrid Composite Debt 15:85 Index

 

7.37%

9.98%

8.85%

9.54%

Source: MFI Explorer | Data as on 31st March, 2022

 

To give an example, Kotak Debt Hybrid Fund invests ~25% in equity & remaining in debt. Out of the 75% in debt, 67% is invested in AAA or equivalent rated issuers. This is about 88% of the entire debt portfolio.

You can typically look at these funds for a duration of 3-5 years. The small equity investments in these funds may help to beat inflation while the debt component tries to protect capital. Hence, such funds have the ability to give better returns than other traditional forms of deposits by taking a maximum of 25% exposure to equities. Call up your finance professional at your bank to understand these funds better and begin investing for a wealthier tomorrow.

Disclaimer

The aforesaid is for information purposes only and should not be construed to be investment advice under SEBI (Investment Advisory) Regulations.

The calculator is only an illustration, to demonstrate the concept of compounding and should not be constructed as a promise, guarantee or a forecast of any minimum returns or future returns. Kotak Mahindra Bank does not assure any safeguard of capital and investments through SIP, does not guarantee or assure any protection against loses. #Mutual Funds are subject to market risk. Please read all scheme related documents carefully before investing. Past performance may or may not be sustained in the future

In the preparation of the material contained in this document, Kotak Mahindra Bank has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the Kotak Mahindra Bank and/or its affiliates and which may have been made available to Kotak Mahindra Bank and/or its affiliates. Information gathered & material used in this document is believed to be from reliable sources. Kotak Mahindra Bank however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. Kotak Mahindra Bank and/or any affiliate of Kotak Mahindra Bank does not in any way through this material solicit any offer for purchase, sale or any financial transaction/commodities/products of any financial instrument dealt in this material. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice

We have included statements/opinions/recommendations in this document which contain words or phrases such as "will", "expect" "should" and similar expressions or variations of such expressions, that are "forward looking statements". Actual results may differ materially from those suggested by the forward looking statements due to risks or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated

Kotak Mahindra Bank (including its affiliates) and any of its officers directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/ are liable for any decision taken on the basis of this material. The investments discussed in this material may not be suitable for all investors. Any person subscribing to or investing in any product/financial instruments should do so on the basis of and after verifying the terms attached to such product/financial instrument. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. Please note that past performance of the financial products and instruments does not necessarily indicate the future prospects and performance thereof. Such past performance mayor may not be sustained in future. Kotak Mahindra Bank (including its affiliates) or its officers, directors, personnel and employees, including persons involved in the preparation or issuance of this material may; (a) from time to time, have long or short positions in, and buy or sell the securities mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation in the financial instruments/products/commodities discussed herein or act as advisor or lender / borrower in respect of such securities/financial instruments/products/commodities or have other potential conflict of interest with respect to any recommendation and related information and opinions. The said persons may have acted upon and/or in a manner contradictory with the information contained here. No part of this material may be duplicated in whole or in part in any form and or redistributed without the prior written consent of Kotak Mahindra Bank. This material is strictly confidential to the recipient and should not be reproduced or disseminated to anyone else

This material is not a research report as per the SEBI (Research Analyst) Regulations, 2014. KMBL - A SEBI Registered MF Distributor. We may or may not have any relation with Kotak AMC.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Kotak Mahindra Bank Ltd., AMFI Registered Mutual Fund Distributor. ARN - 1390

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.