What are a few key parameters to keep in mind while selecting a debt mutual fund to invest in?
- AUM : Bigger the AUM the better debt fund works.
2.Diversify across mutiple funds houses and multiple type of scheme - Growth fund is better than any other type.
- 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.
- Returns are cyclical and depends upon interest rate and credit risk so past Returns are not guaranteed future returns.
- Investor should look at holdings of each fund at highlevel and modified duration and return to gauge the returns ,investment durations.
- If you systematically follow than you can earn 1-4% more returns than FD wrt to returns +taxes in long term .
- Debt funds are not advisable for small capital(< 20 lakhs)as volatility is not worth the returns .FDs or fixed bonds are better.
- 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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