Question: Should I Exit Debt Funds?

Why debt funds are falling?

The recent increase in the 10-year benchmark bond yield has impacted the NAVs of debt funds.

The yield and price of the bonds are inversely related.

Since the yields went up recently, the prices of the bonds currently held by the debt funds came down and this resulted in the fall in the NAV of the funds..

Which debt fund gives highest return?

Top 10 Debt Mutual FundsFund NameCategory1Y ReturnsKotak Bond Short Term PlanDebt10.9%IDFC Credit Risk FundDebt8.4%Mirae Asset Dynamic Bond FundDebt11.3%Franklin India Savings FundDebt6.6%12 more rows

Why mutual funds are bad?

However, mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high expense ratios charged by the fund, various hidden front-end and back-end load charges, lack of control over investment decisions, and diluted returns.

Is it right time to invest in liquid funds?

The interest rate of liquid mutual funds is the lowest among all short-term investments due to low maturity period. No entry and exit loads are applicable. Liquid funds are a perfect solution for investors who wish to park their idle cash for a short duration without the risk of Capital Loss.

Why is debt better than equity?

Debt is a lot safer than equity because there is a lot to fall back on if the company does not do well. Therefore in many ways debt is a lot cheaper than equity.

Do debt funds have exit load?

While debt mutual funds have no lock-in periods, some of the funds carry an exit load which is a charge deducted at source for early withdrawals. The exit load period varies from fund to fund while some funds have nil exit load as well.

Is Franklin Templeton in trouble?

On April 23, 2020, Franklin Templeton wound up six debt schemes that were meant for high-yield investments, with a total asset under management of over Rs 25,000 crore. The company cited inadequate liquidity in the debt market as a reason.

What went wrong with Franklin Templeton?

As redemptions grew from many debt funds, Franklin’s inability to sell its bad securities in illiquid markets caused by a massive sell-off in bonds in the month of March meant that the fund house could not gather generate funds to pay off its investors. A closure of schemes was its only choice.

Are debt funds safe now?

Rule: Investments in debt funds are safe because they do not have exposure to volatile assets such as equity shares. Exception: When interest rates are rising, long-term debt funds can give negative returns. … The worst performing fund lost over 11 per cent during this period.

Should I exit from mutual funds?

If you have invested in equity mutual fund schemes assuming that it would reward you in short term, it is the mistake you did. If you need money in next 2-3 years, you should sell and come out of mutual funds by booking losses. This is to avoid further losses in your portfolio.

What is the risk in debt funds?

Investing in debt funds carries various types of risk. These risks include Credit risk, Interest rate risk, Inflation risk, reinvestment risk etc. But the key risks which needs be considered before investing in Debt funds are Credit Risk and Interest Rate Risk; Credit Risk (Default Risk):

Is Debt Fund better than FD?

After demonetization, many banks lower the FD rates due to excessive liquidity. … As the returns of debt funds demonstrate, you can beat the banks by investing in debt funds. Debt fund investors assume both credit risk and interest rate risk and are hence compensated by higher returns.

What went wrong with Franklin Templeton Mutual Fund?

In an unprecedented move, Franklin Templeton Mutual Fund has closed down six of its debt schemes in India. It has cited severe redemption pressure and illiquidity in the bond markets amid the ongoing coronavirus crisis.

Should I exit Franklin Debt Fund?

Even if you are a risk-taker, limit your investments to credit-risk funds or other debt funds that have high exposure to low-rated funds, to 10-20 per cent (of your overall debt fund portfolio) at best. If you are a conservative investor, exit debt funds that have very high exposure to low-rated bonds.

Which are the safest debt funds?

Scheme nameInception dateCategoryICICI Pru Corporate Bond Gr11-08-2009Corporate BondKotak Bond S/T Reg Gr02-05-2002Short DurationL&T Money Market Gr10-08-2005Money Market FundSBI Savings Reg Gr19-07-2004Money Market Fund30 more rows•Jul 17, 2020