Invest In Tax Saving Mutual Funds Online
Gilt mutual funds, which invest only in Government securities, have taken a tumble in the last four months, after soaring 14-16 per cent in 2012-13, due to the jump in interest rates.
But with the yield on the 10-year government bond hovering close to 9 per cent, its all-time high, this is a good entry point for investors who can hold gilt funds for two-three years. From this point, interest rates may have limited room to rise further in the near term and appear likely to decline over the next one or two years.
However, investors need to choose theirs fund carefully, as the risk of losses in this category can be high. IDFC Government Securities Investment Plan has been a steady performer, delivering a 9.5 per cent annual return over the last three years. The fund has been able to outperform its benchmark even during a rising rate cycle.
The fund's consistent performance comes from its strategy of actively managing the duration of gilts it owns, by taking a view on interest rate movements.
Recently, the fund has increased its duration to skim maximum returns from the possible reversal in interest rates over the next 12-18 months.
The fund has outperformed the benchmark I-Sec Composite Index over one-, three- and five-year periods delivering returns close to 7-10 per cent.
Between April 2012 and May 2013, as the repo rate fell 125 basis points, the fund earned a healthy 18.4 per cent return outdoing its benchmark once again.
The fund has capped losses well too during rising rate cycles. Between March 2010 and October 2011, when policy rates shot up 375 basis points, the fund managed to record a gain of 9.9 per cent.
Even during the recent increase in rates from May 2013, the fund has been able to cap its losses to 1.5 per cent, lower than its benchmark. In comparison to most gilt funds, IDFC G-Sec Fund has managed to weather any sudden reversals in interest rates well.
Gilt funds mainly invest in long-term Government securities. Hence, there is no credit risk in such funds. But these funds can suffer losses or make outsized gains depending on how interest rates move.
As bonds with longer durations are more sensitive to interest rates, funds manage rate risk by altering the duration of the fund.
This year, the fund cut its average duration to 1.5 years in July, when there was limited room for further rate cuts. This helped cap its losses when rates suddenly started to spike from August.
Now betting on a rate cut in the next 12-18 months, the fund has once again increased its duration to 7.2 years. This will help it cash in on rising bond prices, if interest rates start to trend down over the next one or two years.
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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
Invest Tax Saving Mutual Funds Online
Tax Saving Mutual Funds Online
These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)
Download Tax Saving Mutual Fund Application Forms from all AMCs
Download Tax Saving Mutual Fund Applications
These Application Forms can be used for buying regular mutual funds also
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