Skip to main content

Debt Funds Categorisation

Best SIP Funds to Invest Online 


Debt funds are no longer going to come packaged simply as short term income funds or long term income funds. These categories were found to be very broad and did not define the specific interest rate risk attached to a fund.

For example, a mutual fund with an average maturity of 4 years could also fall in the short-term income fund category along with a fund which has a 1.5-year average maturity. The new categorisation guidelines from Securities and Exchange Board of India (Sebi) now specify more targeted categories around level of interest rate risk and credit risk taken by the fund. Here are some changes that you need to look out for.



Short term income funds
This broad category will no longer exist; instead there are four types of funds you can look out for. The Low Duration fund category will look at investing in debt and money market securities so that the portfolio duration is between 6 to 12 months.

Duration measures the sensitivity of bond price to changes in interest rates and is measured in years. Higher the time duration, the riskier a bond investment is as bond prices fall with rise in interest rates. A rise in rates has a greater impact on price of longer term bonds with fixed coupons. Next, there is a category called Short Duration fund which will invest and the portfolio duration is from 1-3 years. Lastly, the Medium Duration fund category will have a portfolio duration between 3-4 years. There is an additional category called Money Market Fund which will invest only in money market securities up to a duration of 1 year. Money market securities are short term debt securities used by governments and corporates to raise money typically for a period which is less than a year.

Long term funds
Long term funds are now broken down to Medium to Long Duration funds which can invest in securities such that portfolio duration is 4 to 7 years and Long Duration Funds which can invest such that portfolio duration is 7 years. Here, the interest rate risk is higher given the longer term duration.

The guidelines allow for the fund managers in Medium to Long Term funds and Medium Duration funds (mentioned earlier) to reduce portfolio duration to a minimum level of up to 1 year in case of anticipated adverse market conditions.

Corporate bonds
Earlier there were no separate categories for funds investing majority of assets in corporate bonds.

This new category called Corporate Bond fund will invest at least 80% in corporate bonds rated AA+ and higher. This is to ensure that the category is invested in high quality securities.

Credit risk
A separate category is created called Credit Risk Fund which can invest at least 65% of its assets in corporate bonds which are at AA rating or below. These were earlier called credit opportunity funds.

This type of mutual fund inherently has a higher credit risk which means the risk of default from securities in the portfolio is higher than other debt funds.

The aim with this detailed categorisation is to help investors identify the maximum permissible risk level, be it interest rate or credit, clearly at the time of investment.



SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now