I would like to update some key information with regard to debt funds. The reason to write is just keep you updated.

We had invested in various kind of debt funds like liquid, short term, credit opportunities dynamic etc.

The short term volatility will be higher in dynamic compared to short term and other category of funds.

There are other funds which are pure play on interest rates which carries high risk, and not suitable for investment and we never invested in such funds.

In the last couple of months 10 year Government bond yields(interest rates) have moved up drastically by more than 1. 30%. To put in simple manner it is rate at which Govt of India borrows from the market. The reasons can be attributed to factors like like rising inflation, crude prices and other macro variables.

As the yields move up, it will have short term mark to market impact on the debt funds invested last 12-15 months. But good part is with the rise in yields, the incremental yields on the funds have moved more or less in same proportion, which will take care of the current under-performance in the next couple of years.

And they became very attractive for further investment for people, particularly sr. citizens who depend on bank fd’s for regular cash flows and liable to income tax, and who still have majority of their investment in bank FD’s earning low post tax returns.
Even for some of you we had invested recently to take advantage of the same with a 3 year plus view.

Note: Those of you holding such funds since last 3-5 years have seen such intermittent phases and seen how they delivered better returns than bank FD’s and other traditional investment vehicles.

The subject of debt funds is little complicated to understand. Do not get confused about the same.

Do let me know in case of any further information.

“Volatility scares enough people out of the market to generate superior returns for those who stay in.”- Wharton prof Jeremy Siegel