In this article, we will explain the categorization of debt funds in brief and its features & impact.
Dynamic asset-allocation funds factor in market valuations before investing in various assets.
With sector funds, the timing of the investment and the health of the concerned sector is very crucial.
If the realized inflation for next year is closer to the expectations policy makers then won’t be in a hurry to hike interest rates as real rates will be around 1.5% which is reasonable to support economic growth.
Market reaction, in terms of yield level, has been decisively positive
As direct plans do not incur distribution expenses, the savings made in total operating expenses remain invested with the fund, which then start generating returns.
Bond prices are inversely linked to interest rates. When interest rates go up, bond prices fall and vice versa.
You can start an SIP in multiple mutual funds with varying amounts.
A debt fund carries low risk in comparison to the equity oriented mutual fund, but they are not totally risk free as many people think.
Earlier, in the absence of any standard definition of MF categories, mutual fund companies and research & advisory firms came up with their own methodologies of categorizing funds.
For the past two to three quarters, the debt market has been more volatile than equity, but for the recent equity market correction in February.
Mutual fund offerings most often exceeded the returns generated by ULIPs in the same category offered by the same investment house, though it might not be a given at all times.
If you are long term investors and worried about highly volatile markets you can invest in these mutual fund schemes.
Making investment decisions just based on the tax advantage has never been a good idea.
Long-term investors benefit hugely in midcaps. Overall, midcaps tend to go through high volatility but, at the end of the day who has remained a long-term investor has amassed considerable wealth.
Investors who don’t want to be part of this excessive fluctuation in the short term can use debt funds and fixed deposits as investment options.
It’s advisable to adopt the twin strategy of Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) to meet financial goals.
Keeping money lying idle is not the best thing to do. If you are a risk-averse investor, fixed deposits and liquid MFs are the best options. Here are some tips that can help you decide your investment plans.
If you need liquidity along with steady returns, short-term liquid funds could be a good option, though returns are not guaranteed as in FDs.
Product awareness campaigns by market participants and sustained backing from the regulator would motivate more retail investors to embrace direct plans.
Bottomline, the policy statement has put a lid on to the markets ultra bearish imaginations and going forward global and domestic data points would be watched for by policymakers as also market participants.
The RBI did flag off the risks to inflation, but did not sound alarmist.
GOI has decided to introduce a 10% tax on long term capital gains on equities and equity oriented mutual funds exceeding INR 1 lakh.
RBI bond comes with a rate of interest of 7.75% which is comparable to the interest offered on the small saving schemes such as National Saving Certificate.
On CNBC-TV18's special show Mutual Fund Day, watch the interview of Sailesh Raj Bhan, Deputy CIO Reliance Mutual Fund and Harsh Roongta, Independent Financial Advisor where they shared financial planning tips for young professionals.