Debt funds offer great return possibilities at this point. This would be a wonderful window of opportunity for those who want better-than-average returns from fixed income investments.
While it’s getting tougher for actively-managed funds, especially large-cap funds, to outperform their benchmarks, passively-managed equity funds have been slow to catch up. The real winner in this category is the Target Maturity Funds. But an encore in FY23-24 seems unlikely, though.
With the indexation benefits gone, debt funds will focus on generating better returns compared to bank fixed deposits. If that happens, they will still be a good bet for long-term fixed-income investors
RBI’s first monetary policy of 2023 may well see its final, or one of its last, interest rate hikes for now. And target maturity funds are an ideal investment for your debt allocation.
Even if interest rates go up further, the extent of the hikes will probably be slower. Target Maturity Funds are a good opportunity to invest in debt markets, with a reasonable predictability of returns.
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Emerging mutual fund categories like target maturity funds, floating rate funds, as well as traditional investments now offer more options to investors
Returns from debt mutual funds have been muted for some time, but in the process, the accrual level has been moving up, which makes it relatively that much attractive.
Don’t touch your existing debt funds, say financial planners. But if you want to invest incremental money, deploy slowly