Why you need to worry about “duration” if your mutual funds invest in bonds

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 funds, hybrid funds, asset-allocation funds, balanced funds). read more

Reducing Tax With Partial Mutual Fund Withdrawals: Examples + Calculator

There are times in life when you require money for a need in stages. The most common example is monthly income. Those who do not have much money to play with, cannot take risks and must rely on interest income which is always taxable as per slab. On the other hand, those who have some money to work with can consider investing in instruments where the profit is treated as capital gains. Here are some examples with a calculator to consider the lower tax that will be applicable. read more

The Trouble With Debt Mutual Funds

Debt mutual funds are not easy products to understand. The moment a bond can be traded in the middle of a tenure, the risk associated with it are often not obvious.  Regular readers would be aware that I have discussed this at length. To compound matters further, it is very hard to spot mutual fund that is style pure.

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Reader Analysis: How I Selected My first Debt Mutual Fund

Anirban Ghosh had posted his analysis of a debt mutual fund at Facebook Group, Asan Ideas for Wealth (AIFW). When I requested him to write an account of how he selected his first debt mutual fund, he readily agreed.  Anirban’s data crunching has unearthed an interesting mutual fund with a curious strategy and is the main reason for my request.

Before we begin, I would like to point out that,

1: the debt mutual funds mentioned in the post should not be treated as recommendations. read more

Franklin India Savings Plus Fund – A Debt Fund For First-time Investors?

Franklin India Savings Plus Fund can be classified as an ultra-short term debt mutual fund that invests predominantly in floating rate bonds (to minimise interest rate sensitivity) of reasonably good credit quality, making it a reasonable candidate for first-time debt mutual fund investors to consider. In this post, I look at the main characteristics of the fund. This post is not a recommendation to invest in this fund. It is a recommendation to learn more about this fund. read more