Last Updated on October 8, 2023 at 1:42 pm
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 main reason for my request.
Before we begin, I would like to point out that,
1: the debt mutual funds mentioned in the post should not be treated as recommendations.
2: Although credit risk is an important factor in mutual fund selection, choosing a fund holding only AAA bonds is NOT the remedy. Those bonds can degrade at any time resulting in a NAV fall: Understanding Credit Rating Risk in Debt Mutual Funds. Therefore, unless a fund invests only in government securities, some amount of credit risk is always there. Even sovereign securities can fail ( we came close to this in the early 90s – which is why PPF rate was 12%). Remember 2008: credit ratings are mere “opinions” and they often change after the negative development.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
3: You will see some notes by me below preceded with a “pattu:”
4: I have no opinion on external links mentioned below as I have not read them.
5: Investors wanting to learn more about debt mutual funds can consider downloading the Free E-book: A Beginner’s Guide To Investing in Debt Mutual Funds.
5: Despite these caveats, I appreciate Anirban’s desire to dig deeper. Without this, one cannot, well, one should not be a DIY investor – it is, dig it yourself after all 🙂
=-=-=-=-=-=-=
- I started off with my biases about AMCs. Wanted to select an Ultra Short Term (UST) Debt Fund only from these fund houses:
Then I applied 5 filters (Why? That is explained in much detail in the two posts hyperlinked above):
- Only Regular Funds (to keep things simple) Pattu: and only for analysis!
- Average Maturity between 0.25 and 1 (i.e., more than 3 months but less than 1 year) Pattu: This depends on the need. If my investment horizon is only a couple of month, I will stick to liquid funds. If is above that and I am new to debt funds, I will keep avg maturity below 1Y
- Average Credit Quality = AAA
- Equity Fund Style such that Credit Quality = High & Interest Rate Sensitivity = Low
- Net Assets more than 1000 Crore. Pattu: This is a thumb rule (not mine, and I don’t believe in it) to avoid liquidity problems when the NAV dips for any reason. AMC biases will often take care of this!
From old Factsheets:
To me it looked like they were talking about keeping Average Maturity within a year. But I was not sure (I am a novice, remember?). So I decided to look up the Average Maturity mentioned in their Monthly Factsheets and this is what I found:
- It is a true-blue UST fund, with Average Maturity never exceeding 1 year.
- Credit Risk is minimal due to the special attention in having only very high-quality holdings. Pattu: and due to the holding period of each security.
- Interest Rate Sensitivity is obviously more than Liquid Funds
- And the whole exercise has been quite fun!
=-=-=-=-=-=-=
Please join me in thanking Anirban for a fine analysis and his generosity in sharing it with the DIY community.
Download the Free E-book: A Beginner’s Guide To Investing in Debt Mutual Funds
=-=-=-=-=-=-=
Kolkata DIY Investor Workshop May 28th 2017
Register for the Kolkata DIY Investor Workshop May 28th 2017
You Can Be Rich Too With Goal-Based Investing
is a book that I have co-authored with PV Subramanyam. if you have not yet got the book, check out the reviews below and use the links to buy.
Reader Quotes:
Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read
The best book ever on Financial Freedom Planning. Go get it now!
Your first investment should be buying this book
The (nine online) calculators are really awesome and will give you all possible insights
Thank you, readers, for your generous support and patronage.
Amazon Hardcover Rs. 317. 21% OFF
Kindle at Amazon.in (Rs. 307)
Google Play Store (Rs. 307)
Infibeam Now just Rs. 307 24% OFF.
If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!
Bookadda Rs. 344. Flipkart Rs. 359
Amazon.com ($ 3.70 or Rs. 267)
Google Play Store (Rs. 244.30)
- Ask the right questions about money
- get simple solutions
- Define your goals clearly with worksheets
- Calculate the correct asset allocation for each goal.
- Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
- Learn to choose mutual funds qualitatively and quantitatively.
More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!
What Readers Say
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! You can watch podcast episodes on the OfSpin Media Friends YouTube Channel. 🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available! Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)