Mutual funds for investing cash gifts received for daughter
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Pankaj Maalde, a certified financial planner, responds:
Your investment horizon of five years is not long enough to invest in equity mutual funds, especially when the market is at an all-time high.
You should park the money in a five-year NSC if you do not want to take any risk. The rate of interest is around 7.90%, and it will be paid at the time of maturity. Kindly note, the interest earned is taxable.
If you want 10% return and can take higher risk, you can invest in a balanced advantage fund. These funds manages their investments dynamically based on the prevailing market conditions. For example, the largest scheme in the category - ICICI Prudential Balanced Advantage Fund - has around 53 per cent in equity, 22 per cent in cash and equivalents, and 24 per cent in debt.You should be mentally prepared to see negative returns.
You may consider investing in ICICI Prudential Balanced Advantage Fund or Kotak Balanced Advantage Fund.