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Do Mutual funds only invest in equities?

By Finserv MARKETS - Aug 1,2019
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Do Mutual funds only invest in equities?

If you are one of those wary investors who think that mutual funds are fraught with risks since they primarily invest in equities, read on. Debt funds, which form more than 50 percent of the total assets under management(AUM) of mutual funds stand at 13.24 trillion rupees(1),while liquid funds with an AUM of 6 trillion rupees form close to 24 per cent(2) share of the total mutual fund industry AUM of Rs 25.93 trillion. Fixed Maturity plans or FMPs as they are called come third with an AUM of close to Rs 1.4 trillion. Now lets us delve deeper into the debt funds.

Debt mutual funds aim to deliver stable and low-risk returns as compared to their equity counterparts since the majority of their holdings comprise of fixed income instruments such as short term or long term bonds, Government securities, corporate bonds and debenture, commercial paper treasury bills and fixed-income securities. If you are looking to get higher returns than a savings bank account or fixed deposit, but do not want to take the risk of investing in equity mutual funds, then you can choose a Debt mutual fund as per your need.

Finserv MARKETS lets you invest in Direct mutual funds where investors can trade directly with the mutual fund company without the need for a broker, who normally charges a commission or fee. A Direct mutual fund has higher returns than a regular plan because of a lower expense ratio. What’s more, you can get started by filling up your KYC or Know Your Customer details on the website and avoid branch visits and long queues. Now let us take a look at the types of Debt mutual funds based on their investment, maturity and risk profile.

  1. Liquid funds invest in highly liquid money-market instruments with a maturity of not more than 91 days and are less risky as they show very little fluctuation. Good for parking funds from a few days to months.
  2. Ultra short-term funds are slightly riskier, with slightly higher returns. One can invest for a few months to a year in these funds that have holdings in securities with a residual maturity of not more than one year.
  3. Short-term funds invest predominantly in debt securities with an average maturity of one year to 4.5 years. Go for this mutual fund if you have a low to moderate risk appetite and an investment horizon of a few years.
  4. Dynamic bond funds as the name suggests, invests across debt and money-market instruments with varying maturities and have a dynamic portfolio that varies with the interest-rate view of the fund manager.
  5. Credit-opportunities funds are good for those looking for medium to long term growth as these mutual funds invest predominantly in corporate bonds and debentures of varying maturities.
  6. Income funds invest in corporate bonds, government bonds and money-market instruments with an average maturity of 4.5 years or more. They have a high-risk quotient since they are influenced by the prevailing interest rates, hence are suitable for those with a long term investment plan.
  7. Short-term, medium-term, long-term gilt funds invest in government securities of short, medium and long-term maturities as per their declared objectives. While not have the default risk since the bonds are issued by the government, they come with a high degree of interest rate risk, since any change in the interest rate affects their NAV. The higher the maturity of the instrument the higher the interest-rate risk.
  8. Fixed-maturity plans or FMPs are closed-ended funds that might seem almost like a fixed deposit and may be attractive to conservative investors. They invest in debt instruments with maturities less than or equal to the maturity date of the scheme.

Now that you have all the information on Debt mutual funds all you need to do is open an account on Finserv MARKETS and get detailed portfolio summaries and insights into the performance of your investments at the click of a mouse in the comfort of your home or office.

Take your time to decide how much risk you want to take and structure your investment goals by choosing funds that align with them and get exclusive offers too. Get a financial plan that structures itself as per your needs and requirements cause no size fits all. As your life goals change, so should your financial goals.

“Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no-cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere”!

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