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…

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…

Many Investors, especially senior citizens, who purchased long term gilts funds (or their cousins, dynamic bond funds) after seeing recent double-digit returns, are puzzled and even worried about why these funds are falling since the last three months. In this post, I discuss the reasons behind this and how to make sense of debt fund…

Dear Reader, This is a pdf collection of 26 posts on debt mutual funds written over the past 4 years. I enjoyed learning and writing about every bit of this fascinating space in finance – tradable fixed income. Debt mutual funds are not exactly easy to understand, but I believe they are not hard to…

The incredulous 7% fall in the NAV of Taurus Liquid Fund due to a credit rating downgrade has many worried.  Can investors avoid such funds? Is this a “small amc” problem? Is this a small aum problem? I thought liquid funds were safe!  Just a sample of how many investors feel. In this post, I…

Here we go again! Yet another AMC has been caught on the wrong foot with one of its bonds downgraded in value. This time it is Taurus Mutual Fund which held at least 65 crores of Ballarpur short-term bonds in four of its funds.  In what was a probably a first for the Indian industry, Taurus liquid…

There are two main risks associated with a debt mutual fund: capital losses due to (1) an increase in interest rates since old bonds are not as valuables as new bonds that offer higher rates; (2) an actual default in the payment of interest or the possibility of default. In this post, I shall introduce a…

Investors who wish to give debt mutual funds a try often find that they are more difficult to understand than equity mutual funds 🙂 Who would have thought a fixed income product (a bond that offers regular payments like a fixed deposits) would be so hard to understand the moment it can be traded to…

Here are some simple steps to avoid mess-ups when it comes to investing in debt mutual funds. Freefincal has 30+ posts on debt mutual funds. It is high-time that I compiled them into an e-book. I need to finish a couple of posts before I can do that. This is one of them. Before we look…

Have you ever wondered why a corporate fixed deposit offers a higher rate of return than a bank deposit? Have you ever considered investing in corporate FDs, but worried about the “risks”? In this post, I simple ways to invest in corporate fixed deposits. Before we begin, allow me to point out that You Can…

In the second part of the introductory series on debt mutual funds, a non-technical discussion of the aspects to consider before buying units of a debt mutual fund. You will be surprised as to how many people buy and then worry about these aspects. The first part is here: What is a Debt Mutual Fund? -meant for absolute beginners. If…