AS INTEREST RATES are likely to be range-bound or declining, individuals can look at target maturity funds and lock-in at higher yields.
Most of these funds at present have a yield-to-maturity (YTM) of 7.3% to 7.5%, which could be a good option for those looking for steady growth on their fixed income investment.
Target maturity funds invest in government securities, bonds of public sector companies and state development loans and hold them till maturity. Investing in a rollown strategy gives the predictability of returns and the volatility tends to reduce as the fund gets closer to the target maturity. If a fund house buys bonds of three years it will not trade on those bonds and investors will get returns close to what the bond has to offer minus the expense ratio.
Low default risk
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