Why Debt funds > Fixed Deposits?

By Rahul Pithadia - As we are already aware of the above terms but still let us have a go through them and then come to an effective conclusion to gain regular income from investments.

Fixed deposit: Deposit of money that gives higher interest on maturity in comparison with saving account. It is safe with moderate returns from 7-9% depending from various banks which is no longer beneficial to beat the inflation rate of our country of past 2 years. They are levied with tax which further reduces the corpus earned.

Debt funds- Invest their corpus in a mix of debt and fixed income securities of different time horizons. Generally they have a fixed maturity date and pay a fixed interest rate around 8-10% which is still affordable. The major benefit is if you pay taxes from your income, higher your income the more tax benefits you get. It can also be a backup investment to balance your portfolio by cushioning equity funds with debt funds.

For 2016, Investing in Birla Sun Life Dynamic Bond Fund is the best approach to make money from the fall in investment. The price of bonds and yield are inversely co-related, bond prices move up when yield goes down and vice versa. One thing the investor should keep in mind is that it’s a debt fund so it won’t give aggressive returns in quick time however it gives decent returns in the long run hence it is advisable to give time to your investments.

Birla Sun Life Dynamic Bond Fund Growth Weekly Chart

 BSL Dynamic Bond Fund, Birla Sun Life Mutual Fund, Elliott Wave Chart, Technical Analysis, Mutual Funds

Birla Sun Life Dynamic Bond Fund is an open ended income scheme that invests in government securities having maturity period of 8-12 years and corporate bonds having CRISIL rating AA- and above.

The portfolio for this fund is shown below:

Asset allocation 20160317

Load Structure: w.e.f 27-Apr-2015, Entry Load – Nil, Exit Load: For redemption/switch-out of units within 90 days from the date of allotment: 0.50% of applicable NAV. For redemption/switch-out of units after 90 days from the date of allotment: Nil

Risk Profile: We will consider this fund as Low Risk scheme suitable for someone comfortable with investing in corporate bonds who have less Risk appetite.

Returns as of 14th March, 2016 -

Returns 20160317

In nutshell: We have been very accurate in advising to park your money in long term debts as RBI can surprise which would result into sharp rise in bond price. Even now the interest rate cycle is on downside and money can be parked into this asset as per the allocation shown in below table.

 

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