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…

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…

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…

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…

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…

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…

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…

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…

We answer a set of questions on gilt mutual funds asked by investors. Interest in gilt mutual funds has increased for two reasons: credit events in debt funds and a gradual reduction in PPF interest rate. We wanted to write an article on selecting gilt mutual funds but realised that before we get into the…