This is the archive of all our articles related to debt mutual funds
Bond yields have been dropping rapidly since the demonetization announcement. As a result, the NAV of long-term gilt mutual funds has been on the increase. At a time when many investors want to benefit from this move, Mr Srinivasan Sundarajan, in this third guest post, cautions to look before you leap. +=+=+=+ About 10 days ago,…
Continue reading →A financial instrument that lets you defer paying taxes until maturity is way superior to one where you need to report and pay tax on the income generated each year of investment. That is the single most important reason why debt mutual funds are superior to fixed deposits. This is an illustration of the power of…
Continue reading →Debt mutual funds are advertised as tax-efficient alternatives to fixed deposits. There is more to investing than tax-efficiency. Investors must be aware of the associated volatility and how it can impact returns depending on the duration. Post-tax debt fund returns may or may not be higher than post-tax fixed deposit returns. The answer to the…
Continue reading →Although it has limited technical utility, the standard deviation is probably the simplest measure of understanding investment risk. Therefore, it has great practical value when it comes to ‘product positioning’ as the fund industry calls it. ‘Where does a given fund fall in the risk vs reward map?’. AMC often given a product positioning risk vs…
Continue reading →In the last ten months, we have had three instances of credit rating downgrades in mutual fund portfolios. We had discussed these in some detail and also suggested ways to choose debt mutual funds with no credit risk and low volatility. In this post, let us look at how these funds have recovered and what we…
Continue reading →Tax-free bonds are purchased in the secondary market via a Demat account when either new ones are not available or not attractive. How does one decide between buying existing tax-free bonds and new ones? Should we just look at the coupon rate and choose the one which is higher? It depends on the purpose of the…
Continue reading →A method to choose debt mutual funds with no credit rating risk and low volatility or interest rate risk from a category known as short-term gilt funds – is discussed. This is post is a follow up to Debt Mutual Fund Investments: Minimizing Risk which referenced the fall in NAV of several Franklin Funds due to…
Continue reading →Franklin Templeton AMC hailed for its ‘strong research’ in selecting corporate bonds has come in for a lot of criticism due the downgrade (Feb 15th 2016) and subsequent default (March 9th 2016) of Jindal Steel bonds. A discussion on how to minimize risk associated with debt mutual fund investments. First, a look at the Jindal…
Continue reading →Many debt mutual funds invest in corporate bonds which carry credit risk. It is important for investors to understand how this can affect debt mutual fund returns. Yesterday, rating agencies, CRISIL, ICRA and CARE downgraded short-term and long-term ratings on Jindal Power and Steel bonds. As a result, the NAV of debt funds which held…
Continue reading →Here is a comparison between three types of funds (by choosing one in each category): Short-term gilts funds, Long-term gilt funds and ultra short-term gilt funds. In this post, I would like to reiterate a point made earlier about staying away from gilt funds unless we know how to trade in accordance with interest cycle…
Continue reading →Dynamic bonds are debt mutual funds with a flexible investment strategy. There is a perception that they funds can be used to take advantage of interest rate movements to maximise gains. Unfortunately, these funds do not reward investors enough for the effort and risk involved in its investment strategy. Which is why I believe that…
Continue reading →There are two ways in which an investment in a debt mutual fund grows: (1) by buying bonds with high coupon rates and holding them until maturity. The growth in this case is by accrual of interest. (2) by choosing long-term bonds issued by the government and aim for capital gains when the bond price increases due…
Continue reading →Here are step-by-step instructions for choosing a liquid mutual fund. This post is inspired from a comment by Firoz Hajiani. I think the following steps might help the reader become familiar with some of the aspects that govern debt fund selection. The first question to answer is, Why choose a liquid fund? Many ‘experts’ suggest that…
Continue reading →If my financial goal is 15-plus years away, PPF is an obvious and pretty good choice for a debt instrument while trying to put together a diversified portfolio. ‘Which debt mutual fund should I choose for the same purpose, if my goal is less than 15 years away?’, is a question that is asked often enough….
Continue reading →Since the time my step-by-step guide to selecting (Equity) mutual funds become popular, I have been receiving requests to publish a similar guide for debt mutual funds. Well begun is half-done. If an investor can confidently select categories suitable for their financial goals, short-listing a set of funds from that category is that much easier….
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