This is the archive of all our articles related to debt mutual funds
It is quite easy to see extreme reactions to many aspects of personal money management. Yield-chasing or seeking to invest in high-interest rate fixed income products is no different. Many investors vehemently believe that there is no place for risk in a portfolio. “We have enough risk from equity, so why take on more risk…
Continue reading →A reader asks, “Which among the following two has higher credit risk? 1. Gilt fund (actively managed) or 2. FD in a nationalized bank? I need to choose one for a 10-year goal for the debt portion”. On the face of it, this might look like a trivial question to at least experienced investors. However,…
Continue reading →A reader asks, “You usually recommend money market funds for short-term goals. Can we also consider Ultra Short Duration Funds for this purpose?’ The definition of money market funds is simple: “Investment in Money Market instruments having maturity up to 1 year”.Ultra-short duration funds are defined as “investment in Debt & Money Market instruments such…
Continue reading →This article lists the essentials an investor needs to keep in mind before selecting debt mutual funds. (1) Debt mutual funds are not replacements for fixed deposits! Do not take product manufacturers (AMC guys) and sales guys seriously! A fixed deposit in a bank too big to fail has a risk so small that it…
Continue reading →A reader asks, “Sir, a friend recommended ICICI Prudential Short Term Fund is a suitable choice for my need which is three years away. The AMC website says the fund can be used for durations above six months. Can you please let me know if this is true and if I can proceed with the…
Continue reading →UTI Gilt Fund with 10-year Constant Duration is an open-ended debt scheme that invests predominantly in government securities issued by central and state governments. The weighted average portfolio maturity will be maintained at around ten years. A reader wants to know if this is the right time to buy such a product. Also, The fund…
Continue reading →Several readers have asked us what their debt fund strategy should be in the wake of the interest rate hike by RBI. In this edition of FAQ, we discuss what debt mutual fund investors should do. Our coverage of the rate hike also includes: Explained: Why did RBI increase the REPO rate? How will it…
Continue reading →In a move that surprised everyone, the RBI hiked the repo rate from 4% to 4.4%. This means newer short-term bonds will have a higher interest rate. The market will expect longer-term bonds also to be more rewarding. The demand for all existing bonds will fall and so will the price. Since an investor would…
Continue reading →With consumer inflation close to 7 %, the reserve bank increased the rate at which it lends to banks from 4% to 4.4%. Why was this done and what are the implications for us? A simple explanation. When inflation increases it typically means, the demand for goods is higher than the supply. For absolute newbies,…
Continue reading →The average retail investor fears debt mutual funds much more than equity funds. Debt mutual funds are harder to choose and the risks are harder to understand (especially when no effort is put in). To tackle these issues, the MF industry has come up with a class of products called Target Maturity Debt Funds. In…
Continue reading →The first fact sheet of Parag Parikh Conservative Hybrid Fund (PPCHF) is now available. The fund now has an AUM of Rs. 292 Crores. This provides some more clarity on the nature of the fund and who should invest in it. During the NFO period of the fund, we had pointed to several unknowns about…
Continue reading →There are several misconceptions surrounding debt mutual fund selection. We shall discuss a couple of them in this article. Many investors believe dynamic bond funds are better than gilt mutual funds because of active fund manager calls on the portfolio’s duration. Investors also believe that corporate bond funds (or banking and PSU funds) are less…
Continue reading →On June 7th 2021, SEBI introduced a “potential Risk Class Matrix for debt schemes based on Interest Rate Risk and Credit Risk” In this article, we explain what it is and discuss if it helps investors. The new rule comes into effect from 1st Dec 2021 but can be implemented immediately by fund houses if…
Continue reading →In this article, let us discuss which categories of mutual funds we can use for 3-5 year financial goals in response to a question on our YouTube channel. We had recently discussed which equity mutual funds to use for 8-9 years SIP and pointed out that asset allocation and risk management is more important than…
Continue reading →In this article, we provide a step-by-step guide to choose a gilt mutual fund. Gilt mutual funds are those that invest a minimum of 80% of their portfolio in government securities (Gsecs or gilts). We have already discussed the basics of gilt mutual funds and when to invest in a two-part FAQ. We recommend newbie…
Continue reading →Shushanth asks, “dear Pattu Sir, thank you for the recent articles about gilt mutual funds, but I think they are too volatile for me. Can I use banking and PSU funds instead of gilt funds for long-term goals?” The underlying assumption here seems that Banking and PSU debt funds are “safe” and less volatile than…
Continue reading →In the second part of the FAQ on gilt mutual funds, we consider the correlation between equity and gilt movements. An analyst would calculate this using a correlation coefficient and create a matrix. This is not intuitive to the average investor. So we shall seek the answer to a simple, direct question: If equity MF…
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