Are Debt funds going to give good returns?

[nikhilfake]

Hi Guys,

I was thinking of putting my spare cash in Debt Funds like

Medium Term
1) Canara Robeco Income
2) Sahara Income
3)BSL Dynamic Bond Ret-G

Would these funds give better returns than bank FD if I invest for about 1 year to 2years timeframe?

-Would a good way to look at the funds for my timeframe be the Average Time to Maturity ? BSL is 0.91 but Canara Robeco Income is about 3yrs.

thanks
Nikhil

 

[nikrod]

Hi Guys,

-Would a good way to look at the funds for my timeframe be the Average Time to Maturity ? BSL is 0.91 but Canara Robeco Income is about 3yrs.

Average time to maturity can be used as an indicator for interest rate risk of the fund. If interest rates are increased, bonds with higher maturity fall most. Bonds with lower maturity are more insensitive to interest rates.

But funds with higher average time to maturity have better potential for giving returns. So it is risk-reward decision.

 

[praveen taneja]

Average time to maturity can be used as an indicator for interest rate risk of the fund. If interest rates are increased, bonds with higher maturity fall most. Bonds with lower maturity are more insensitive to interest rates.

But funds with higher average time to maturity have better potential for giving returns. So it is risk-reward decision.

:clapping::clapping::clapping::clapping:

 

[nikrod]

Hi Guys,

I was thinking of putting my spare cash in Debt Funds like

Medium Term
1) Canara Robeco Income
2) Sahara Income
3)BSL Dynamic Bond Ret-G

Would these funds give better returns than bank FD if I invest for about 1 year to 2years timeframe?

-Would a good way to look at the funds for my timeframe be the Average Time to Maturity ? BSL is 0.91 but Canara Robeco Income is about 3yrs.

thanks
Nikhil

The 3 & 5 year returns for your funds go like this

1) Canara Robeco Income - 13.73, 10.14
2) Sahara Income - 10.24, 8.42
3)BSL Dynamic Bond Ret-G - 10.51, 8.69

Keep taxation in mind while investing in debt funds. If you plan to hold the investments for more than a year than indexation benefits will make debt funds better than FD's. Otherwise you can opt for dividend option.

PS - Your fund choice is excellent. Go ahead & invest in these funds if you plan to.

 

[nikhilfake]

Thanks!

One more question: If I have a timeframe of 2 years, what would be the best fund category to consider? Short-term or medium-term? What should be the deciding factors other than
- Rating by ValueResearch and others
- Expenses

thanks!

Nikhil

 

[nikrod]

Thanks!

One more question: If I have a timeframe of 2 years, what would be the best fund category to consider? Short-term or medium-term? What should be the deciding factors other than
- Rating by ValueResearch and others
- Expenses

thanks!

Nikhil

Not too sure about whether to choose short term or medium term funds for 2 years. Personally, I feel that since interest rate hikes are anticipated this year, your money should go in short term funds. Once rates are hikes significantly, you should move money to medium term debt funds.

Expenses should always be considered while deciding a debt fund, since huge expense ratios can hamper the performance badly.

 

[nikhilfake]

Not too sure about whether to choose short term or medium term funds for 2 years. Personally, I feel that since interest rate hikes are anticipated this year, your money should go in short term funds. Once rates are hikes significantly, you should move money to medium term debt funds.

Expenses should always be considered while deciding a debt fund, since huge expense ratios can hamper the performance badly.

=Well, if the time frame is 2yrs and more, do you think MIPs would be a better option? This is basically planning for my debt based investment.

=Also, if the interest rate is the problem, can I directly purchase new company FDs that I can keep till redemption? PSU or reputed companies like Tata, L&T ?


thanks
Nikhil

 

[nikrod]

=Well, if the time frame is 2yrs and more, do you think MIPs would be a better option? This is basically planning for my debt based investment.

MIP's are slightly more risky than debt funds since they have 15-20% equity component. Investment decision depends upon your risk apetite. Over the period of 3+ years, MIP's equity component should balance out the risk.

=Also, if the interest rate is the problem, can I directly purchase new company FDs that I can keep till redemption? PSU or reputed companies like Tata, L&T ?

Again, company FD's are little more riskier than bank FD's. They are also taxed like traditional FD's. You can choose FD of a good company for better returns than traditional FD's.

 

[nikhilfake]

Thanks Nikrod.

I've decided to go with company FD's (with AAA) for the full term. Do you know if I can buy it directly from ICICIDirect ? I'm new to buying CompanyFD's so I'm wondering if I can purchase *new* FD's right now? Where can I get such info?

thanks!
Nikhil

 

[nikhilfake]

Hi,

I am planning to invest some liquid money (about Rs2 lakhs and then Rs 50k per month) in Debt oriented funds like:

1. Reliance MIP (G)
2. Canara Robeco Income

My question is

1. Whether lumpsum investment in debt funds is a problem? Is SIP a better way to go?

2. For Reliance MIP (and MIP in general), if I choose the Growth option, does that mean, that I won't get monthly income and it would just be invested again in the scheme (like in Equity Growth schemes)?

thanks
Nikhil