'A dynamic bond fund acts like a gilt fund in a rate cut scenario and like a conservative short-term bond fund when rates rise.'
Before you invest, check the fund manager's track record in managing such a strategy, asserts Sarbajeet K Sen.
Ask rediffGURU and PF expert Nitin Narkhede your mutual fund and personal finance-related questions.
With the RBI infusing Rs 7.5 lakh crore in liquidity -- and possibly more in the future -- the short- to medium-term corporate bond market is expected to benefit.
Experts say investors need not tinker with their debt portfolio as shifting won't be tax-efficient.
Debt mutual fund (MF) schemes are set to register the best calendar year (CY) performance in the last four years despite no changes in the interest rate. An analysis of one-year performance of debt funds show that many of the schemes are set to deliver double-digit returns in CY 2024.
'When interest rates rise, the NAVs of these funds will fall.' However, they won't fall as much as longer-duration funds.
Debt fund managers are reassessing their strategies after the setback delivered by the Reserve Bank of India recently. While most are refraining from any knee-jerk reaction to the central bank's surprise open market operation (OMO) announcements, they are taking a re-look at the duration of their schemes. Sandeep Yadav, head of fixed income at DSP Mutual Fund, said it has trimmed the duration of some schemes, considering the hawkish stance by the RBI.
P V Subramanyam clears some misconceptions about debt funds.
The mutual fund (MF) industry had an action-packed 2023 as it tackled the scrapping of tax benefits for debt fund investors and surging flows into equity funds.
'Your decisions should not be driven by your view on the market, but by your objectives, risk appetite, and time horizon.'
Actively managed debt funds with the flexibility to go long on duration made a strong comeback on the returns chart in 2023, thanks to softening bond yields. The average one-year returns of floater, long-duration, gilt, and dynamic bond funds, which ranged between 2.3 per cent and 4.5 per cent at the end of 2022, now stand at over 7.2 per cent, with some schemes delivering over 8.5 per cent, according to data from Value Research. Debt fund returns are inversely related to yields of underlying investments, meaning a decline in yields is positive for funds.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
The bulk of an investor's portfolio should be in shorter-duration funds of up to one year portfolio duration.
Investors who decide to enter medium to long-duration funds should be cognisant of the risk.
'They can transition from short to long-duration funds when the yield curve normalises.'
Why it is important for investors to select the right product according to their specific investment needs, risk appetite and investment tenure.
Select the exact category by matching your investment horizon to the portfolio duration, suggests Sanjay Kumar Singh.
If you are in credit opportunity funds, income funds or dynamic bond funds for a long-term goal, stay put.
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
'Do some profit booking and bring your equity allocation back to its original level.'
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
Outflows are likely to continue, experts say, till such time as the markets see a significant correction.
Use fixed maturity plans to tide interest rate volatility if you're okay with lock-in because longer duration. FMPs can give up to annualised 7.7 per cent returns.
Those getting into debt instruments like short-term funds, ultra short-term funds and income funds may need to extend their investment horizons or pay higher exit loads. The past couple of months have seen 16 such funds either raising their exit loads or increasing the scheme's lock-in period.
Omkeshwar Singh, head, Rank MF, a mutual fund investment platform, answers your queries.
The investment strategy would revolve around structuring the portfolio so as to capture the positive price movements and minimise the impact of adverse ones.
For existing investors, it may be prudent to redeem their current investments in gilt or dynamic schemes and invest it in short-term funds, if the exit load is not very high, advises Malhar Majumder.
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Omkeshwar Singh, Head, Rank MF, a mutual fund investment platform, answers your queries.
Expect more volatility in the coming year as the economy and markets price in the demonetisation drive.
SBI has twice hiked interest rates on fixed deposits within a month, but an investor still gets better returns at the post office.
Interest rates on bank FDs have started coming down and rates on other fixed-income products will also decline. Investors should lock in to instruments offering higher returns.
Go for high quality and low-to-medium-duration funds in your debt portfolio
Debt fund managers think the Reserve Bank governor might at best go for one rate cut in April.
Investment guru and mutual fund expert Ashok Kumar, answers all your MF related queries.
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