freefincal

Here is how one can choose a liquid fund in 2019 by minimizing credit risk. The recipe is simple: stop chasing returns; stop using star ratings and understand investment strategies.  In the past couple of years, we have seen huge losses in liquid funds – something that was considered to be impossible. So we would […]

Every time debt mutual funds face credit risk – a sharp drop in NAV due to the credit rating downgrade of a bond – investors get spooked. Credit risk is part and parcel of fixed income and debt mutual fund investing and one cannot run away from it. However, after the SEBI categorization rules, I […]

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 […]

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. […]

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 […]

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 […]