Select mutual fund product based on investment horizon and risk tolerance
by Research Team

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Posted on January 01, 2016

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Mutual funds are very versatile instruments and offer a variety of choices to the investors, depending on their investment objectives (capital appreciation versus income), investment horizon (short term versus long term) and risk tolerance.

There are three important factors based on which investors should construct their mutual fund portfolio.

• Investment horizon


• Risk appetite


• Liquidity considerations

Investment horizon and risk tolerance are interlinked factors. Shorter the time horizon, lesser is the risk that an investor is willing to accept. However, within the same investment horizon, the degree of risk appetite may be different for different investors. The table below shows, the various mutual fund products depending on the investment horizon and risk tolerance levels.

Parking your surplus cash: Investment horizon less than 1 year

The table below shows suitable fund categories based on the time that the investor is willing to hold his or her investment

Looking for income over 1 to 3 years

The table below shows suitable fund categories based on the investors appetite for volatility and the interest rate environment.

Looking for income and capital appreciation in the long term (time horizon over 3 years)

The table below shows suitable fund categories based on the investors risk appetite and investment objectives.

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