This is the archive of all our articles related to debt mutual funds
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…
Continue reading →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…
Continue reading →Generally, debt products are expected to have lower volatility than equity mutual funds. However, many investors find that debt fund volatility is a lot higher than what they anticipated. This is because of incorrect expectations and a poor understanding of the factors that influence debt fund returns. In this article, we discuss a simple way…
Continue reading →A sentiment that has gained popularity after the Franklin debt funds fiasco is, “avoid all kinds of risk in debt funds”. Now I notice investors preferring liquid funds even for long-term goals stating they cannot tolerate any NAV fluctuations. Does it make sense to use such short-term funds like liquid funds even for long-term goals?…
Continue reading →In this article, we review a pair of yet another open-ended target maturity index fund: IDFC Gilt 2027 Index Fund and IDFC Gilt 2028 Index Fund. These come hard on the heels of Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026. It is good to see AMC’s wake up to the benefits of…
Continue reading →If you read the scheme information document of a typical debt fund, say PPFAS liquid fund, you would fund interest rate swaps mentioned in many places. An interest swap is a derivative product used to hedge interest rate risk by mutual funds. In this article, we explain with simple examples, how swaps work. About the author:…
Continue reading →In the past week, gilt mutual funds fell between 1-2%. Dynamic bond funds fell 0.8% to 1%, Banking and PSU funds, corporate bond funds and all categories of debt funds holding medium to long term bonds fell by varying extents. Why did this happen? Will it impact the stock? What it means to your investments.
Continue reading →Franklin Templeton AMC has received 1252.44 crores from Vodafone Idea towards full principal and interest dues for the period June 12 to July 9, 2020. The AMC will now close the segregated portfolios (side-pocket) and payout investors. Here how this payout will be taxed. Thanks to an amendment in budget 2020, the taxation of segregated…
Continue reading →According to the income tax rules, the gain from each unit of a non-equity mutual fund that is older than three years is subject to 20% taxation with indexation benefit using the cost inflation index. With the Cost inflation index for FY 2020-21 just announced, let us see how tax is lowered on all debt funds,…
Continue reading →Gilt mutual funds can be tricky to understand. Those who assume they have invested in “safe” govt bonds would be shocked to see how much their prices (NAV) fluctuates daily and can even lead to negative or low returns over a few years. In this article, we find out if a market timing method can…
Continue reading →The titular question was posed by a reader a few days ago. Naturally, the AMC would allow a SIP from any MF, but does it make sense to start one in a gilt mutual fund that invests in long-term govt bonds? We look the SIP returns of I-BEX a composite sov bond index to understand…
Continue reading →In the last year (as on 29th May), two gilts ETFs returned 13% and all direct plan gilt funds moved up between 10% to 17%. Is this then a good time to buy gilt mutual funds?
Continue reading →While corporate investors withdrew from several Franklin debt funds forcing the closure of six funds (a first in India), the AMC lost 28,664 Crores of debt fund AUM from 31st Dec 2019 to April 30th 2020. Amusingly, one of their debt funds grew 520% in AUM! A look at the change in their debt AUM.
Continue reading →The mutual fund industry lost 16% equity AUM bet Jan 31st 2020 to April 31st 2020. It also lost 14% debt AUM! While a good part of the equity AUM fall was due to the crash, the debt AUM fall was primarily due to redemptions triggered by the crash and associated fear. This is how…
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