Skip to main content

Debt portfolio can yield good returns

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Tax Saving Mutual Fund Application Forms
Call 0 94 8300 8300 (India)
It's a good time for debt allocation with both short-term and long-term options offering good returns


   In the midst of a rising inflation and the resultant higher interest rate scenario, there is some good news if you are a short-term investor. Your money, even if parked for a short period of time, can get you good returns. In the last few months, the annualised returns offered by money market and liquid funds have moved upwards. The annualised returns have been in the range of over six percent.


   Ironically, the returns offered by a number of sector funds have been substantially lower or negative during the same period. After more than a 1,000-point rally, index funds managed to add some green to their chart.


   So, the debt market is not a bad place to be in considering that many other assets are looking not too comfortable. While equity always carries risk and its riskreward ratio changes according to timing of entry, other assets too are demanding perfect timing. Property is a perfect example which was once considered a safe haven for the long term. Commodities, because of their global linkage, are increasingly volatile and expensive too. Hence, for the risk-averse investor, there are only a few options in terms of asset classes. But the good news is that the segment as a whole is getting lot of action and with the recent budget proposals, the debt market in India, is in for major growth.


   When you consider debt as an asset class, there is a growing confusion among - should they choose innovative products or simply stick to vanilla products where what you see is what you get (or earn in this context). The fear is understandable considering the fact that the 2008 financial crisis is a by-product of smart innovations in debt and derivative products.


   So, in an era where debt products are giving smart returns and even closer to double digit, investors can stick to vanilla options. While debt is for the short term and for those who don't need risk, it can have some allocation if the portfolio is aiming for a 10 percent growth over the medium term. Here, investors will have to keep in mind the tax implications as 10 percent returns offered by a fixed deposit need not be tax-free returns. Since interest income is taxable, you need to keep in mind the tax-free exemption limit. While super senior citizens have the luxury of parking a large corpus because of their higher exemption limit in the coming days, it is not the case for many others.


   In this context, monthly income plans of mutual funds can come in handy. While dividend is tax-free because of dividend distribution tax, it offers some added advantage in the form of lower effective tax on long-term capital gains. If you were to take into account the indexation benefit, the real returns from these products can be superior to other vanilla debt products.


   Interestingly, in the last few months, investors have also had the opportunity to park long-term money in debt options with a number of issuers hitting the market with 10-year maturity papers. They are a good option in the current environment because of high interest rates. For instance, any investor would be willing to settle for a 9-10 percent interest rate option for a period of 10 years if liquidity is not an issue.


   Unfortunately, very few investors fall into this category as more often than not, debt investors prefer liquidity. While a retired individual needs regular source of income, a high net worth individual may look at debt for tiding over liquidity. For such investors, a 10-year product may not fulfill the requirement unless asset allocation demands such a product for risk management. Those who can afford to allocate can make the best use of the current environment.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

 

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...
Read more

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...
Read more

UTI Equity Fund Invest Online

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   UTI Equity Fund   Invest Online UTI Equity is a large cap-oriented fund with assets under management worth Rs. 2,269 crore (as on June 30, 2013). The fund was originally launched in May 1992 as UTI Mastergain and is benchmarked against S&P BSE 100. A couple of years back the name of the fund was changed to UTI Equity Fund and many of the smaller funds of UTI were merged into this fund. Performance The fund has outperformed its benchmark as well as the equity diversified category average in the last one-, three- and five-year periods. It has repeated the same in 2013 (as on May 31). Since its inception the fund has delivered an impressive 26 per cent compounded annual growth rate which is superior to its benchmark performance in the same period. Y...
Read more

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...
Read more
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