What to Do When You’re Holding Cash

Why These Funds (and Not Others)?

• Liquid & Arbitrage funds help preserve value while you wait to deploy—thoughtfully.

• Large‑, Mid‑, and Small‑Cap funds give access to rising equities at different risk-adjusted speeds.

• Flexi‑Cap, Balanced Advantage, Hybrid funds allow a calibrated mix of equity-debt, helping you manage volatility and tax better over time.

Think of it as assembling a colour‑coded dashboard for your cash and future equity exposure.

The 7 Mutual Fund Types at a Glance

Fund TypeExample FundRisk Level~5‑Year CAGR*Expense RatioIdeal For

Liquid FundHDFC Liquid Fund – Direct GrowthLow–Moderate≈ 5.6 % p.a.~0.20 %Emergency buffer or short-term parking

Arbitrage FundKotak Equity Arbitrage – DirectModerately Low≈ 6.5 % p.a.~0.44 %High-tax bracket investors seeking stability

Large‑Cap FundMirae Asset Large Cap – DirectModerately High≈ 18.9 % p.a.~0.54 %Core equity exposure for ≥ 5 years

Mid‑Cap FundAxis Mid‑Cap Fund – RegularVery High≈ 23 %–24 % p.a.~1.56 %Higher-growth equity allocation for ≥ 7 yrs

Small‑Cap FundNippon India Small Cap – DirectVery High≈ 37.7 % p.a.~1.40 %Aggressive growth seekers with ≥ 7–10 yr horizon

Flexi‑Cap FundParag Parikh Flexi Cap – DirectVery High≈ 24.4 % p.a.~0.63 %Diversified equity across caps & geographies

Balanced AdvantageHDFC Balanced Advantage – DirectHigh≈ 24.3 % p.a.~1.43 %Dynamic equity-debt mix, ideal for < volatility

Equity HybridSBI Equity Hybrid – DirectVery High≈ 17.1 % p.a.~0.73 %Equity exposure with ≥25 % debt cushion

Highlighted Picks & What Makes Them Tick

1. HDFC Liquid Fund (Direct–Growth)

• 98% in instruments ≤ 91 days; performance is close to Nifty 1-Year T‑Bill

• Annualized ~5.6% over 5 years, with expense ratio just ~0.20% ET Money

• Riskometer: Low–Moderate—ideal interim parking for ₹1 lakh to crores

2. Kotak Equity Arbitrage Fund (Direct–Growth)

• Targets cash–futures inefficiencies to generate ~6–7% returns, regardless of market direction; invests residual in debt Kotak Mutual FundKotak Mutual Fund

• 5‑year return ~6.5%, expense ratio ~0.44% Kotak Mutual Fund

• Taxed like equity—good if you aim for tax-efficient stable gains and want ~65% in equity-side logic like arbitrage funds require investopedia.comKotak Mutual Fund

3. Mirae Asset Large Cap Fund (Direct–Growth)

• Heavy investments in India’s top‑100 firms; ~85% large cap exposure ET Money

• Delivered ~18.9% annualized returns over the last 5 years; expense ratio ~0.54% ET Money

• Riskometer: “Very High” with ~11.6% standard deviation—great near core market exposure

4. Axis Mid‑Cap Fund (Regular Plan)

• Focuses on 101‑250 ranked mid-cap firms; more volatile but higher potential returns ET Money

• 5‑year CAGR ~23.3%; expense ~1.56% (regular plan) valueresearchonline.com

• Best used via SIP over ≥7 years to ride long-term growth, cushion setbacks

5. Nippon India Small Cap Fund (Direct Growth)

• Invests in high-growth, lower-cap stocks with high turnover (~126%) moneycontrol.comvalueresearchonline.com

• 5‑year return ~37.7%; standard deviation one of the highest in the industry; riskometer: Very High bmsmoney.comvalueresearchonline.com

6. Parag Parikh Flexi Cap Fund (Direct Plan)

• Invests across caps, including U.S. equities (up to 20%), hence greater diversification valueresearchonline.com

• 5‑year CAGR ~24.5%, expense ratio ~0.63% valueresearchonline.com

• Riskometer: Very High, with ~77% equity and 19% debt exposure; suitable for large horizon & global diversification valueresearchonline.com

7. HDFC Balanced Advantage Fund (Direct–Growth)

• Shifts dynamically between equity and debt based on PE band triggers; aims for 65–80% equity at all times files.hdfcfund.com

• 5‑year CAGR ~24.3%; expense ratio ~1.43% valueresearchonline.com

• Better downside protection when markets fall, while participating in upside cycles

8. SBI Equity Hybrid Fund (Direct Plan)

• ~73% equity, 22% debt; debt portion has exposure to Government bonds & low credit instruments ET Money

• 5‑year CAGR ~17.1%; expense ratio ~0.73%

• Combines equity growth with some buffer—good for moderate horizons

  How to Use These Funds in Smart Deployment

A. Short‑term parking (0–6 Months)

• Split your war chest between:

  • HDFC Liquid (70–50%) for stability, and

  • Kotak Arbitrage (30–50%) for higher yield and tax efficiency.

B. Gradual Equity Transition Strategy

• Decide your overall equity intake (e.g., 60% of total corpus).

• Adopt a Hybrid Start: say 30–40% in Mirae Large Cap or HDFC Balanced.

• Use STP (Systematic Transfer Plan) over 6–9 months to phase into:

  • Axis Mid‑Cap, PPFAS Flexi Cap, and Nippon Small Cap as per risk target.

C. Long‑Term Core Equity (≥5–7 Years)

• Keep allocations anchored in Large Cap and one Flexi‑Cap fund.

• Add Mid‑Cap slowly via SIPs during corrections.

• Dip into Small Cap with a separate SIP bucket only during market dips or valuations below long-term mean.

D. Rebalancing & Tax Triggers

• Monitor if equity portion drifts >±5% from your goal.

  • Rebalance by selling whichever leg is overweight.

• Trim small-cap exposure if market highs breach 20× trailing Nifty PE.

• Use LTCG exemption limits (₹1 L/year) strategically.

Smart Pro Tips

• Always invest in Direct Growth Plans—keep expense ratios low (~0.2–0.7%) to maximize long‑term compounding.

• Keep one folio per AMC (Asset Management Company) to avoid paperwork and duplicate KYC entries.

• Maintain a 6‑month expenses fund separately—never redeploy this into equities.

• Automate SIPs or STPs—less friction, fewer emotional mistakes.

Thought on this -

Whether you're waiting out volatility or consciously allocating across risk bands, picking one fund from each category—anchored in direct, verified plans—gives you a robust core-port folio:

• Short-term needs meet safety (Liquid / Arbitrage)

• Mid‑term allocation blends growth (Balanced, Hybrid, Large Cap)

• Long-term vision rides compounding (Mid/Small/Flexi‑Cap).