If liquid and short-term debt funds gave negative returns in March 2020 when the Franklin Templeton fiasco was on in full swing, duration funds turned negative in March 2021. Most debt schemes with long-duration investments, which had delivered double-digit returns in 2020, are back at single digits now. Experts blame volatility in bond yields for such a high variation in returns in the short term.
Debt funds are considered safe as they hold fixed-income securities. However, as the above examples show, this is not true. “Debt mutual funds are subject to mark-to-market valuation on a daily basis due to yield fluctuations which, many times, may lead to negative returns in the short term. However, this is a short-lived phenomenon as, over a longer period, you should generally earn what was the yield-to-maturity at the time of your investments unless there are some defaults in the underlying portfolio,” says Raghvendra Nath, Managing Director, Ladderup Wealth Management.
Apart from these risks, the debt fund universe is complex, with as many as 16 categories. The performance of each category depends on the interest rate cycle. When interest rates rise, short-duration funds such as liquid and ultra-short-term funds do well, but long-duration funds turn risky. The opposite happens when rates are falling. Since interest rates were falling, duration funds such as gilt funds were giving double-digit returns in the first part of FY21. A different story will play out in FY22 as the yield curve rises.
Esta historia es de la edición May 02, 2021 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.
Ya eres suscriptor ? Conectar
Esta historia es de la edición May 02, 2021 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.
Ya eres suscriptor? Conectar
"Moving to cloud helped us grow❞
What was the problem you were grappling with?
She's Got Time
MORE WOMEN ARE BECOMING WATCH CONNOISSEURS, SEEKING OUT BOTH JEWELLED AND TECHNICAL WATCHES FOR THEIR STYLE AND CRAFTSMANSHIP
RISING STAR
PARUL GULATI IS a name that's been steadily gaining prominence in the Indian entertainment industry after she appeared on season 2 of Shark Tank in 2023. She has become a multifaceted personality who effortlessly transitions between acting and entrepreneurship.
Building on a Legacy
WHEN ZAHABIYA KHORAKIWALA stepped into her role as Managing Director of Wockhardt Hospitals over a decade ago, she confronted formidable challenges that have since turned into achievements.
LEADER IN INNOVATION
AS FEDEX'S PRESIDENT (Middle East, Indian subcontinent and Africa), Kami Viswanathan has a lot on her plate.
WAITING IN THE WINGS
Here are those who missed out as they have not yet completed a year in office; they'll be strong contenders in 2025
A DECENT PROPOSAL
IN TODAY'S WORLD OF TRYING TO CREATE AN EQUITABLE SPACE, BOTH MEN AND WOMEN CONTRIBUTE TO THEIR HOUSEHOLDS. WOMEN ARE ENCOURAGED TO HAVE THEIR OWN SAVINGS POOL AND INVESTMENT ROUTINE. GIVEN THIS, HOW SHOULD FUTURE BRIDES APPROACH FINANCIAL PLANNING?
Women and the STEM Bias
EMPOWERING WOMEN IN STEM WILL NOT ONLY BENEFIT INDIVIDUALS, BUT ALSO STRENGTHEN THE ENTIRE INDUSTRY, DRIVING INNOVATION AND PROGRESS.
ROCKET WOMEN
WOMEN IN INDIA ARE NOT ONLY VENTURING INTO SPACE BUT ARE ALSO STARTING TO SPEARHEAD THE COUNTRY'S EFFORTS IN THE GLOBAL SPACE RACE.
ONE STEP FORWARD
THE NUMBER OF WOMEN INDEPENDENT DIRECTORS IS GROWING STEADILY, BUT IT'S A LONG WAY FROM GENDER PARITY. MUCH MORE NEEDS TO BE DONE TO BREAK THE GLASS CEILING IN BOARDROOMS.