The Mutual Fund Show: Options for Fixed Income Investors
Do you have money parked in a fixed deposit? Is it because you consider it safe or because you don’t know other avenues?
There are mutual fund alternatives that offer better returns, according to Gurmeet Chadha of Complete Circle Consultants and Amit Bivalkar of Sapient Wealth. The thing to keep in mind is that interest rates will go up from here, they said on The Mutual Fund Show.
For savings of up to one year
Both guests suggested that it is important to match the target maturity of the invested money and the portfolio. If the investment target is six months and the portfolio matures in three years, there is a lag, Chadha said.
Bivalkar said that for fixed income investors with a horizon beyond one year, it is imperative to protect investments from a rate reset to the lowest possible costs. He suggested short-dated roll-down funds maturing until March 2022, as they bear the lowest reset costs through a reversal of the liquidity cycle.
Amit Bivalkar recommends
Money Market: DSP savings; Invesco Money Market; Axis Banking PSU Fund
Arbitration Fund: Diagrams of asset management companies ICICI, Edelweiss, Axis and IDFC.
Gurmeet Chadha suggests
For savings of one to three years
Chadha recommends a combination of corporate bond funds, short-term funds with an average maturity of one to three years and a modified duration of 1.5 to 2 years as the best choices.
Axis Corporate Debt Fund, HDFC Corporate Fund and Sun Life Aditya Birla Corporate Bond Fund meet its criteria.
Savings with a maturity of more than three years
Chadha said investors with such a time horizon can benefit from indexing. He recommends the Bharat Bond ETF, corporate bonds with higher coupons and RBI Floating Rate Bonds 2020.
Bivalkar said those with an investment horizon of five years or more should invest in equity funds because the returns would be much better.