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Debt Funds – Which Factors Should You Consider While Investing In Debt Funds


Interest rates are currently trending down.Its time now for investors to think about debt mutual funds rather than traditional fixed deposits.Loan rates will come down slowly & inevitably deposit rates also.

So under this scenario,its best idea to think for debt mutual funds with more tax efficient option .But one should think for following couple of factors while investing in debt mutual funds.

Quality of Instruments:

Debt funds invests in different kind of instruments like Govt loan,Bonds,Debentures,Certificates of deposits.Such instruments offered by Govt as well private owned companies.

Investor should ensure that there is negligible allocation of fund in the instruments having  A or below A rated instruments.

In case of equity funds,few good stocks can overcome under performance of bad stocks but this is not case for debt funds.One single default can adversely affect the returns.So while choosing the debt fund ,don’t forget to check fund portfolio along with history of past performance.

Investment duration –

Duration of investment is the next important factor.Different funds are designed as per objective of the fund & before investing ensure that your objective of investing matches that with the fund.

Average maturity of portfolio :

This factor is for them who want to explore more.It determines the time of maturity of assets.If average maturity is higher then greater is the interest rate risk.

Type Of Funds:

Currently interest rates are trending down there is scope for bonds to offer good returns.So probably dynamic bond funds or income funds having more exposure in good rated bonds is good investment idea.Investors expected to have dash of equity can also think for monthly income plans.

Also View:

Different types of Debt Mutual Funds.


Category: Mutual Funds

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Information provided on this blog is for general purpose only & not investment advice.Please take advice of SEBI Registered Investment Advisors before taking any investment decision.
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