After the IL&FS bond downgrade, it should be clear to all debt mutual fund investors that a high credit rating does not mean much. Even a small degrade will affect the NAV. While I am firm of the opinion that such credit risk NAV falls are part and parcel of debt mutual fund investing, many … Continue reading Looking for liquid funds with low credit risk? Here are some options →

Last weekend, rating agency ICRA downgraded bonds of Infrastructure Leasing and Financial Services (IL&FS) . The long-term bond ratings went from AA(+) to BB. That is a huge downgrade! We need to stop and count this! AA(+) --> AA --> AA(-) --> A(+) --> A --> A(-) --> BBB(+) --> BBB --> BBB(-) ---> BB(+) ---> BB. … Continue reading IL&FS Bond Downgrade: You cannot beat FD returns without facing losses! →

A fixed deposit is one of the simplest instruments to understand. However, make the FD tradeable mid duration then all sorts of complications will arise. You will lose money if you try and sell when interests increase or if the bank suffers financial trouble and drops in credit ratings. It is no secret that debt … Continue reading Worried about risk in debt mutual funds? Park your money in overnight mutual funds →

SEBI’s Mutual Fund Scheme Categorization requires fund houses to use a term known as Macaulay Duration to differentiate among debt mutual funds. Here is a simple explanation of what is Macaulay Duration and the more important modified duration and why you need to understand their significance if your mutual fund invests in bonds (debt mutual … Continue reading Why you need to worry about “duration” if your mutual funds invest in bonds →