Debt mutual funds offer more tax benefits and returns than other fixed income instruments.
Debt investments are a part of most portfolios. These work as a shock absorber for investors by delivering stable, though not very high, returns. Among the debt instruments available, debt mutual funds are one of the most recommended, especially when interest rates are falling -- they have delivered double-digit returns in the past two years and are tax efficient (see Tax Gains).
However, a few recent incidents have got investors worried. Those who had invested in four debt funds of Taurus Mutual Fund were in for a shock when net asset values, or NAVs, of their funds fell 7-11 per cent in a single day in February this year. Such losses are difficult to digest even for equity fund investors. The reason for the fall was the downgrade of rating of debt papers of Ballarpur Industries in which the funds had invested. This is not the sole instance of debt funds delivering negative returns. In August 2015, two schemes of JPMorgan Mutual Fund had suffered losses due to downgrade of debt papers of Amtek Auto.
BE INFORMED
These incidents highlight the inherent risks in debt funds that mutual fund investors should be aware about. Among debt securities, there are different instruments that a fund can take exposure to. These include government securities, certificate of deposit, commercial paper and nonconvertible debentures. The funds’ performance will depend on how the underlying instruments are doing.
“The extent of fall or rise in prices of fixed income securities is a function of the coupon rate, days to maturity and the increase or decrease in level of interest rates,” says Avnish Jain, Head, Fixed Income, Canara Robeco Mutual Fund. There are two types of risks that these funds carry.
Credit risk:
この記事は Business Today の July 02, 2017 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、8,500 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Business Today の July 02, 2017 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、8,500 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
"Hire for attitude, not ability"
Thryve Digital is a player in the healthcare technology sector delivering next-generation solutions
Road Warrior
For Khalid Wani, Senior Director of Sales at Western Digital India, life is much more than just the corner office. Biking across the world is one way he derives meaning for his life
WIDENING THE POOL
THERE HAS BEEN A JUMP IN INDIVIDUALS INVESTING DIRECTLY IN THE STOCK MARKETS, BUT MUMBAI AND AHMEDABAD STILL ACCOUNT FOR THE LION'S SHARE. THERE DEFINITELY IS SCOPE FOR IMPROVEMENT IN TERMS OF PENETRATION LEVELS ACROSS THE COUNTRY
CRISIS IN THE CLOUDS
INDIAN AVIATION IS IN CRISIS. AIRLINES ARE GRAPPLING WITH FLIGHT CANCELLATIONS, CREW SHORTAGES, AND COMPLAINTS ABOUT POOR SERVICE, ARE BLEEDING DUE TO RISING COSTS WILL THE FASTEST-GROWING AVIATION MARKET RECOVER?
"India should start privatising public sector banks"
Arvind Panagariya, Chairman of the 16th Finance Commission, on growth, inequality, jobs, the banking sector, and more
THE DARK SIDE OF GOLD LOANS
THERE HAS BEEN A SHARP RISE IN GOLD LOANS IN RECENT YEARS. BUT THERE IS A SEEDIER SIDE TO THIS, AS IS EVIDENT FROM THE RED FLAG THE RBI RAISED RECENTLY. WILL THE REGULATOR'S MOVE PROTECT CUSTOMERS?
"I LET MY WORK DO THE TALKING"
Megha Engineering & Infrastructures MD P.V. Krishna Reddy on being low profile, the infra opportunity and much more
"Core of insurance lies in long-term security"
Vibha Padalkar, MD & CEO of HDFC Life, on the insurance provider's performance, surrender charges, and future innovations
Distress in the Books
Bandhan Bank, the brainchild of Chandra Shekhar Ghosh, has made the journey from an MFI to a bank, but with many hurdles. Now with his resignation as MD & CEO, is the lender staring at more uncertainty?
A Stellar Debut
The TAC Infosec IPO saw bids worth ₹8,417.33 crore pouring in, thanks to intense bidding from all categories of investors