Want to do a SIP for Rs 5000 but I am a conservative investor

Your decision to invest in equities is wise because even though you are retired you have monthly income from your private practice and can afford to take some risks. While it is unfortunate that you had a poor experience with shares and mutual funds, historical studies have conclusively proven than equity as an asset class has always given the highest return over a long investment horizon compared to other asset classes, including fixed income (example FDs, bonds etc), real estate and precious metals (example gold, silver etc). The key to investment success in equity is to avoid speculation and investing in quality names for a long period of time. As such, it is recommended that you stay invested for a period of at least 3 years if you are investing in equity.

Since you are a moderately conservative investor you can consider investing in hybrid funds. Hybrid mutual funds invest in both equity and debt securities. The risk in hybrid funds is less than purely equity oriented funds. There are broadly two types of hybrid funds. They differ in terms of asset allocation. Equity oriented hybrid funds, also known as balanced funds invest 65% or more in equities and the balance in debt. Debt oriented hybrid funds, also known as monthly income plans, invest around 20 – 25% in equities and the balance in debt. Obviously higher the allocation to debt, lower is the risk, but also, lower the potential returns. Equity oriented hybrid funds or balanced funds enjoy equity taxation, whereby dividends are tax free and long term capital gains for holding period of more than 1 year is tax exempt. Debt oriented hybrid funds or monthly income plans are subject to debt taxation, whereby dividends are paid after withholding dividend distribution tax and capital gains for less than 3 years are taxed as per your income tax rate. If the holding period is more than 3 years for debt oriented hybrid funds, then capital gains are taxed at 20% after allowing for indexation, a benefit that you do not get in fixed deposits. Further, please note that there is no tax deducted at source (TDS) for mutual fund investments.

Balanced Funds have given on an average around 13% compounded annual returns over a long time horizon. Tata Balanced Fund, Franklin India Balanced Fund, L&T India Prudence Fund, SBI Magnum Balanced Fund, Birla Sun Life 95, Canara Robeco Balanced Fund, DSP Black Rock Balanced Fund, ICICI Prudential Balanced, HDFC Balanced Fund etc. If you want less aggressive balanced, you can consider ICICI Prudential Balanced Advantage Fund, Reliance Equity Savings Fund.

Monthly Income Plans have given on an average around 11% compounded annual returns over a long time horizon. Monthly income plans like Birla Sun Life MIP 25, ICICI Prudential MIP 25, Reliance MIP, UTI MIS Advantage, Tata MIP Plus, Franklin India MIP etc have good track record of strong performance