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Here’s everything you should know about investing in debt funds

The Mahindra Manulife Short-Term Fund, which reopens for continuous sale and repurchase from February 25, aims to provide investors a quality and diversified fund that can help them generate returns over a period of three years.

February 25, 2021 / 05:03 PM IST

The adage ‘Don’t put all your eggs in one basket’ is best applied to financial investments. It is always advisable to diversify your portfolio and take advantage of different asset classes to minimise risk and maximise returns.

With this view, investors look at different investment tools to meet their long and short-term goals. They gain knowledge about different asset classes that can help them generate better returns. One of the funds that have attracted investors’ attention for short-term goals is debt funds, especially after the Reserve Bank of India (RBI) announced the retail investors can buy government securities.

Thus, to educate investors about debt funds, Mahindra Manulife Mutual Fund hosted an exclusive webinar on ‘Analysing Debt Funds’ under its series ‘Know Your Debt Funds’, in partnership with Moneycontrol.

During the virtual chat, experts Rahul Pal, Head Fixed Income, Mahindra Manulife Mutual Fund and Kirtan Shah, Co-founder& CEO, SRE Wealth guided retail investors about short-term debt funds and how investors with different risk profiles can add these instruments to their portfolio. The session was moderated by Sumaira Abidi, Deputy Editor, CNBC-TV18.

Speaking about the principles of debt funds and their performances, Pal spoke about capital appreciation and much more.

“With duration funds, the principle is simple. It tends to have a capital appreciation much more when you have interest rates falling because bond prices move up. The way the regulation has classified the debt is long and medium duration funds, which tend to do extremely well when you have positive interest rate cycle,” said Pal.

As the discussion progressed, Shah gave insights into how to construct a debt portfolio and why it is important for individuals to understand their risk profiles- conservative, moderate and aggressive.

“At a broader level, someone who is conservative would generally want to have 80% of the investment on the debt side, somebody who is moderate would want to have 50% investments on the debt side, and someone who is aggressive would still want 20% on the debt side,” said Shah.

He advised investors to bucket their investments into three categories- liquidity, core, and tactical.

Besides the nitty-gritty of debt investments, Pal also informed about Mahindra Manulife Mutual Fund’s short-term debt scheme and how it will help investors in delivering risk-adjusted returns. He added the portfolio is agnostic to credit rating.

“Our focus is definitely on quality of securities, a quality portfolio which ensures good liquidity and risk management practices which behoove the best of its kind. The attempt is to ensure that we be credible, transparent and perform with a risk-returns which investors expect and that would be the core architecture of our fund management,” said Pal.

The Mahindra Manulife Short-Term Fund, which reopens for continuous sale and repurchase from February 25, aims to provide investors a quality and diversified fund that can help them generate returns over a period of three years.

The fund house has robust internal strategies based on Risk Guard Process, based on which managers invest in quality instruments of high safety investment grade.

Meanwhile, during the webinar, the experts also delved into risk processes, volatility, challenges, and much more.

Watch the full episode here

This is a partnered post
first published: Feb 25, 2021 05:03 pm
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