After the DHFL incident, Is parking money in debt funds still considered safe ?
Not all debt funds are created equal. Of course there are poor funds, but not every fund is the same. If your intent is to park money there are 2 simple things you can do to reduce default risk:
- Pick a fund that doesn’t take credit risk. Quantum Liquid Fund is one such fund which only invests in T-bills abd PSU papers. It has explicitly said that it won’t invest in cporporate bonds. But the safety means, it won’t be the top performing liquid fund by retunrs. But investing in Liquid funds for returns is the exact wrong thing to do.
- Always go for a Liquid fund with the higest AUM. This will ensure diversification and reduces concentration risk. Alos, large funds are used by companies for treasury management. This means the AMCs will do anything not to mess up.