Debt

It’s time to revisit my favorite Howard Marks anecdote:

We can never quite know what the future holds in precise detail, but it certainly holds much promise.

In the present, we are in the midst of the General Elections. In my 30-year investing career, the level of suspense over the election outcome has never been lower.

Investing in a debt fund is quite different from buying a bond.

With the evolving financial markets, debt funds are seen as an alternative to traditional investment products. Such funds invest in debt securities and money market securities to generate returns for the investors. Such funds mainly invest in Govt. Securities (G-Secs), Corporate Bonds, money market instruments, etc. Here are five basic terms to know about debt funds:

The evolution of financial markets has opened a wide range of investment options before the investors, wherein they may choose to investment product to suit their financial goals, risk profile and investment strategy.

Floater Rate Fund is an open-ended debt scheme predominantly investing in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/ derivatives). These schemes will invest at least 65% of its net assets in floating rate instruments. 

Mutual funds have continued to be preferred by the retail investors with sustained SIP inflows during recent times. Investors may choose from a vast universe of mutual funds, which may be primarily classified into five major categories – equity funds, debt funds, hybrid funds, solution-oriented schemes, and other funds. Different types of mutual fund schemes tend to suit investors with different variants of risk profile, investment horizon, financial goals, etc.

When it comes to mutual fund investing, investors can choose between actively and passively managed funds. While both aim to provide market-linked returns to the investors, these funds tend to differ on many parameters.

With a wide range of mutual fund schemes are available for investments, it becomes imperative for the investors to carefully review the available options and then select the mutual fund schemes best suiting the risk profile, financial goals, and investment horizon. Different mutual fund schemes may be suitable for financial goals with varied investment horizons.

It is always advised, "one should not have all its eggs in the same basket." This advice works well in the investment world, as no single asset class has always been a winner for investors. As such, the investors tend to prefer having a diversified investment portfolio across different asset classes.

One of the expectations from fixed income asset managers this time of the year is their annual forecasts on inflation, repo rate or government bond benchmarks. Forecasting typically involves answering the following question: “Given the data we see today, what will be the value of a variable at a period”. It is often said that forecasting exists to make astrology look good.