Capital Protection Mutual Funds

What Is a Capital Protection Fund?

How Does a Capital Protection Fund in India Work?


Capital protection funds usually allocate at least 70% of the fund corpus to debt instruments. The remaining capital gets invested in equity securities.

The amount allocated to debt securities ensures that an investor’s principal investment is recovered at maturity. Accordingly, these funds invest in debt securities with the highest rating. Furthermore, since these schemes hold the debt instruments till the end of the maturity period, interest rate risk is mitigated.

On the other hand, fund managers of these schemes invest the rest of the fund corpus in equity and equity-related instruments with purposes of achieving  capital appreciation.

Consider the following example to understand the working of capital protection fund –



Corpus Value

Rs. 100

Investment in debt instruments

Rs. 83

Investment in equity

Rs. 17

CAGR on equity investment


Value of debt securities upon maturity

Rs. 100

Value of equity portion upon maturity

Rs. 22.63

Value of the fund at the end of the maturity period

Rs. 122.63

Benefits of Capital Protection Funds

What Are the Returns from Capital Protection Funds?

Who Should Invest in a Capital Protection Fund?

How to Invest in Capital Protection Funds?

Things to Consider Before Investing in Capital Protection Funds

Tax Implications of Top Capital Protection Funds

Frequently Asked Questions