Are Mutual Funds Worth The Risk?
Business Today|July 14, 2019

Debt funds have eroded substantial investor wealth over the past few months. Are they worth the risk?

Renu Yadav
Are Mutual Funds Worth The Risk?

Mutual fund assets under management have almost doubled to 23.42 lakh crore in the past three years. Although the growth has been led by equity funds, the largest chunk of mutual fund money is still parked in debt funds — they account for more than half the assets and have seen 48 per cent absolute growth over the past three years, as per data provided by Icra Online. Although institutional investors are the major holders, retail investors have also been increasing their exposure to debt funds over the past few years to beat the low bank fixed deposit rates. Individual investors’ share in debt funds (retail and high net worth individuals) has gone up from 28 per cent to 32 per cent in the past three years as debt fund returned more than fixed deposit rates in 2016.

All this has changed over the past few quarters. Debt mutual funds have suffered massive losses that have wiped off half the value of some funds in a single day (See Unprecedented Losses). The trigger has been defaults by some big names in the non-banking finance company (NBFC) sector and lowering of ratings of papers issued by a number of NBFCs. In fact, after IL&FS defaulted on its loans, some liquid funds (considered safe) delivered negative returns to the tune of 5 per cent in a day. This has shaken the confidence of investors. Does all this makes debt funds a bad option?

How it Started

Financial planners advise you to have some allocation to debt funds as they are less risky than equities. “The role of a debt fund is to meet shortterm goals and provide a cushion to the portfolio. We need to ensure that the money invested in debt has some capital protection and liquidity,” says Shweta Jain, Founder, Investography.

Esta historia es de la edición July 14, 2019 de Business Today.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

Esta historia es de la edición July 14, 2019 de Business Today.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

MÁS HISTORIAS DE BUSINESS TODAYVer todo
The EV Craze
Business Today India

The EV Craze

The country’s growing luxury car market is seeing a shift with environmentally-conscious consumers betting on electric vehicles as a sustainable travel option. Though just 6%, the share of EVs in the luxury segment is rising rapidly

time-read
5 minutos  |
November 10, 2024
The Storage Boom
Business Today India

The Storage Boom

Data centres are being built at a frenetic pace in india as companies scramble to meet the ballooning demand from mobile phone users and firms adopting al. Can the country’s energy infrastructure keep up?

time-read
8 minutos  |
November 10, 2024
India Beckons
Business Today India

India Beckons

Owing to rising incomes in India and overall wealth expansion, luxury brands are wooing the country like never before

time-read
4 minutos  |
November 10, 2024
The Pearls of The Sea
Business Today India

The Pearls of The Sea

Caviar, that rare food, is considered the epitome of fine dining. Here is everything that you need to know about it

time-read
4 minutos  |
November 10, 2024
66.Brand persona should define the core"
Business Today India

66.Brand persona should define the core"

I’d say this was a strategic pivot. We had an iconic brand, but had, over time, evolved into diversified lines of businesses that could no longer be represented within the confines of our ‘name’.

time-read
1 min  |
November 10, 2024
Unwind in Style
Business Today India

Unwind in Style

Here is acomprehensive list of top tech picks that help you unwind by blending perfection in performance with luxury

time-read
3 minutos  |
November 10, 2024
A Lifelong Affair with Inspiration
Business Today India

A Lifelong Affair with Inspiration

In my art journey, the diversity of my acquisitions mirrored the expanding horizons of my understanding of art

time-read
3 minutos  |
November 10, 2024
Make it Bubbly
Business Today India

Make it Bubbly

Champagne is much more than just a symbol of celebration and success. Know about its nuances beyond the bubbles

time-read
4 minutos  |
November 10, 2024
Palatial Splendour
Business Today India

Palatial Splendour

Buoyed by renewed demand, sales of the glitzy mansions of the ultra-rich are surging like never before. Real estate majors are looking to capitalise on this by launching luxury offerings in record numbers

time-read
7 minutos  |
November 10, 2024
Of Beaches and Cream
Business Today India

Of Beaches and Cream

GianChand Single Malt Whisky

time-read
1 min  |
November 10, 2024