LIC Mutual Fund: In the eyes of Indian investors, the terms “safety” and “LIC” are almost interchangeable. Many individuals opt for the secure route of fixed deposits (FDs) when it comes to investing their earnings. However, in today’s climate of increasing inflation, relying solely on FDs can erode the real value of your savings.

In such a scenario, if you desire a secure investment that also yields 1.5% to 3% higher returns compared to FDs, then considering the low-risk schemes offered by LIC Mutual Fund could be a wise choice.

Distinct from the unpredictable swings of the stock market, these four unique schemes by LIC Mutual Fund cater to investors seeking to gradually expand their wealth with minimal risk. Let’s delve into these four schemes:

1. LIC MF Banking & PSU Debt Fund: Ensured security

For those averse to risks, this fund is a fitting choice. As the name implies, this fund primarily directs investors’ funds into secured bonds issued by public sector companies (PSUs), the country’s most robust banks, and the Reserve Bank of India (RBI).

Its aim is to deliver steady returns while safeguarding capital, without any involvement in the stock market. This scheme suits investors looking to invest for 1 to 3 years, offering a secure and dependable alternative to bank fixed deposits.

2. LIC MF Savings Fund: A superior option for short-term investments than a bank account

Often, individuals find themselves with substantial amounts of money in their bank savings accounts, earning a meager 3-4% interest. The LIC MF Savings Fund, a low-duration debt fund, invests in safe, short-term corporate bonds and money market instruments.

This fund strikes a balance between liquidity (the ability to withdraw funds) and a decent yield. If you intend to park your funds for 6 months to 2 years, it may prove more advantageous than a savings account or a short-term FD.

3. LIC MF Arbitrage Fund: Stock market exposure and tax benefits without risk

This fund employs a clever strategy of profiting from the price differential between the cash market and the futures market, rather than directly investing in stocks.

Irrespective of market movements, this fund offers minimal potential for losses. Its notable advantage lies in its tax benefits. Despite being as secure as a debt fund, it is categorized as an equity fund under income tax regulations, resulting in lower tax rates and higher net returns compared to an FD. This scheme suits those aiming to invest for 3 months to 1 year and fall in the high tax bracket (30%).

4. LIC MF Conservative Hybrid Fund: Tailored for long-term investors

Including a minor equity element in your portfolio is vital if you seek returns that surpass inflation rates. This fund allocates 75-80% of your total investment into highly secure bonds to ensure capital protection. The remaining 20-25% is invested in prominent stocks, including blue-chip companies.

This mix of debt and equity performs well over extended periods. Though it may experience slight fluctuations due to stock market movements, it consistently outperforms fixed deposits in the long run. If you can commit to investing for 3 to 5 years or longer, this fund can become a sturdy component of your portfolio.

What to consider:

Experts recommend opting for a Systematic Investment Plan (SIP) when starting to invest in these funds, rather than a lump sum investment. While bank FDs lock in funds and incur penalties for premature withdrawal, these mutual funds not only keep your funds secure but also provide easy access for withdrawals as needed.