Have you ever been on a rollercoaster?
They are the scariest rides in amusement parks.
They are designed to scare and thrill…
Imagine yourself getting into your seat and getting strapped in.
The ride starts and you slowly began to rise up. You are nervous.
SUDDENLY there comes a fall.
And then the momentum pushes you up all over again.
Up and down it goes…at breathtaking speeds.
This happens multiple times.
The sudden, shocking twists and turns, ups and down is what the ride is all about.
The screaming never stops.
This rollercoaster ride could be an analogy for market movements.
Especially true during the current scenario. As Pandemic disrupts economy it
has also impacted severely to all asset classes.
Not just equities, recently we have seen turbulence in debt market too.
As a long-time follower of Quantum, you know we believe that debt funds are
moderate to high risk fund.
Yes, moderate to high risk.
Since few were willing to call a spade a spade in the wake of winding up of
some of the debt fund schemes, we went into over drive to educate investors.
Our Founder, Ajit Dayal and Fund Manager Pankaj Pathak spoke at a widely attended webinar revealing the underlying problems in the debt markets and educating the viewers on how they should manage their “safe” money.
They also spoke at length to explain why it is critical for debt investors to
select funds carefully.
In this article we further aim to tell you that this isn’t the end of the road for
debt investors.
Here’s our guide on how to navigate this space and ensure your “safe”
money is not put at undue risk…
1. Choose safety over returns
Choose your fund carefully. Debt funds are only an alternative to other fixed
income instruments.
Your priority should be to invest in debt funds or debt instruments, which
keep your money safe and liquid.
If you are looking for higher returns, debt funds are not the right funds to invest in.
When debt funds aim for higher returns, Fund Managers invest in higher risk instruments. This increases the chance of default, and therefore, losses.
Look for funds that invest in highest quality paper…choosing safety over returns.
2. Match your investment tenure to the nature of the debt fund
If you have a short term surplus, then you need to be investing in what is
called a Liquid Fund.
Choosing a liquid fund is not as easy as it seems. In fact, you could lose
money on a liquid fund if you do not choose carefully.
So, what should you look for?
First, the liquid fund should not take any credit risk i.e. it shouldn’t be
investing anywhere but the highest quality assets (usually Government bonds)
Second, the assets held by the liquid fund should be liquid, allowing for large withdrawals.
That’s all. And yet, if you go around looking for a liquid fund that matches
these requirements, all the best. There are few. At best.
In conclusion, invest in debt funds that don’t feel like a roller coaster ride.
Achieving all three - high safety, high liquidity and high returns is not possible.
So don’t go down that route.
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please visit - www.QuantumMF.com to read Scheme Specific Risk Factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme’s objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.