Being a senior citizen, it depends on your father whether he wants to be absolutely risk free or is willing to take some amount of risk.
Now, by investing into fixed deposits, he is risk free , but at the same time he'll be getting less interest rate of return on fixed deposits.
Mutual funds are mainly categorized into 3 types depending on the type of risk one needs to take:
1) Debt mutual fund: Debt Mutual Funds mainly invest in a mix of debt or fixed income securities such as Treasury Bills, Government Securities or Corporate Bonds etc.
2) Equity mutual fund: It is a category wherein investors' money is invested in stocks of companies
3) Balanced mutual fund: It gives a mix of equity and debt mutual funds.
Now, in terms of volatility and risk that your father is willing to take following order is suggested:
Debt mutual fund < balanced mutual fund < equity mutual fund
Considering debt mutual fund to be least volatile and risky, followed by balanced mutual fund and equity mutual fund.
But, the problem with debt mutual funds is that of taxation, when an investor withdraws money from debt mutual fund he will be taxed whereas if money is withdrawn from equity mutual fund post one year it is not taxed.
Therefore in order to gain fully from debt mutual fund, the investor needs to invest his money for at least 3 years in the fund.
Balanced mutual funds have invested 65% of investors' money into equities and therefore they carry a considerable amount of risk.
The most risky being equity mutual funds of all 3, but taxation norms are on easier side as compared to debt mutual funds.
Following are some examples of debt, equity and balanced mutual funds you can consider to invest in:
Debt mutual fund:
1. HDFC Medium Term Opportunities Fund
2. IDFC Money Manager Fund - Investment Plan
3. IDFC Super Saver Income - Medium Term
4. Kotak Corporate Bond Fund
5. Aditya Birla Sun Life Floating Rate Fund - LT
Equity mutual fund:
Large Cap Equity funds wherein companies have large capitalization in the stock market
1. Aditya Birla Sun Life Top 100 Fund
2. Invesco India Dynamic Equity Fund
3. Kotak Select Focus Fund
Small Cap and Mid cap Mutual funds
1. Aditya Birla Sun Life Small & Midcap Fund
2. L&T Emerging Businesses Fund
3. L&T Midcap Fund
Balanced mutual fund :
1. Reliance Regular Savings Fund - Balanced
2. Aditya Birla Sun Life Balanced 95 Fund
3. HDFC Balanced Fund
4. L&T India Prudence Fund
5. Canara Robeco Balance