Investing in a debt MF

What are a few key parameters to keep in mind while selecting a debt mutual fund to invest in?

  1. AUM : Bigger the AUM the better debt fund works.
    2.Diversify across mutiple funds houses and multiple type of scheme
  2. Growth fund is better than any other type.
  3. Need to follow interest rate cycle.When interest rate rising can invest in short term funds ,corporate floater,psu/banking.When interst rates are peaked or down cycle than invest in Gilt, medium term ,long term funds.
  4. Returns are cyclical and depends upon interest rate and credit risk so past Returns are not guaranteed future returns.
  5. Investor should look at holdings of each fund at highlevel and modified duration and return to gauge the returns ,investment durations.
  6. If you systematically follow than you can earn 1-4% more returns than FD wrt to returns +taxes in long term .
  7. Debt funds are not advisable for small capital(< 20 lakhs)as volatility is not worth the returns .FDs or fixed bonds are better.
  8. Debt mutual funds are the best of you want margin for trading/investing(via futures)
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Similar post and few others have expressed good points.

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