Should I invest lumpsum in LIC or mutual funds?

I want to invest a lumpsum of Rs 2 lakh to Rs 3.5 lakh in LIC or mutual funds or in some other investment option. I am a conservative investor and cannot afford to lose money. I want decent returns. Where should I put my money?
--Karthik Balachandar

LIC offers life insurance policies. Do not mistake it for investments. The real purpose of life insurance policies it to safeguard the interests of your financial dependents on your death. When you buy insurance policies with savings or investment element in them, you end up with a very small insurance cover that defeats the entire purpose of buying a life insurance cover. Such policies also offer only modest returns.

Always stick to pure investment products like mutual funds to achieve your financial goals. If you have a long investment horizon of at least five to seven years, you may consider investing in equity mutual fund schemes. If you don't want to take much risk, you may consider investing in an equity-oriented hybrid scheme or balanced scheme. These schemes invest in a mix of equity and debt and the debt part of the portfolios offers a cushion during volatile phases in the market. You may consider investing in HDFC Balanced Fund.


However, if you have a short investment horizon, you should stick to debt mutual funds. They are relatively riskier than bank deposits, but can also offer marginally higher returns.