Falling interest rates have hurt equity savings and conservative hybrid fund (erstwhile monthly income plans) investors. It has been a double whammy for them. On the one hand, the expected returns are headed lower and, on the other hand, expenses are sticky at the higher end. Investors have to either make peace with low returns or invest in specific bond and equity schemes to benefit from lower expenses and thereby earn a bit more.Falling returns and sticky expensesConservative hybrid funds invest 10-25 percent of their assets in stocks and the rest in bonds. These schemes are taxed like bond funds. Equity savings funds invest around 30-35 per cent in equities and 30-35 percent in bonds. The remaining amount is invested in spot-futures arbitrage opportunities in equities, such that the gross exposure to equities is kept at a minimum of 65 percent. The objective is to qualify for the taxation of equity funds.Close related news Personal Finance | Why a roll-down strategy of bond funds helps reduce, but not eliminate, interest rate volatility Fund review: Should you invest in Franklin India Feeder-Franklin US Opportunities Fund? How to choose the right hybrid fund based on your investment horizon Over the three years… Read full this story
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