The Mutual Fund Show: Options For Fixed-Income Investors

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Do you have money parked in a fixed deposit? Is it because you consider it safe or you don’t know of other avenues?

There are mutual fund alternatives that offer better returns, according to Gurmeet Chadha of Complete Circle Consultants and Amit Bivalkar of Sapient Wealth. What has to be kept in mind is that interest rates will rise from here, they said on The Mutual Fund Show.

For Savings Of Up To A Year

Both the guests suggested it’s important to match the target maturity of the money invested and the portfolio. If the investment target is six months and the portfolio matures in three years, there is a mismatch, Chadha said.

Bivalkar said for fixed-income investors with a horizon beyond a year, it is imperative to protect investments from a rate reset at the lowest possible costs. He suggested short-tenor roll-down funds maturing through March 2022 as these bear the least reset costs through a reversal of liquidity cycle.

Amit Bivalkar Recommends

Money Market: DSP Savings; Invesco Money Market; Axis Banking PSU Fund

Arbitrage Funds: Schemes by ICICI, Edelweiss, Axis and IDFC asset management firms.

Gurmeet Chadha Suggests

For Savings Maturing In One To Three Years
Chadha recommends a combination of corporate bond funds, short-term funds with one to three-year average maturity and 1.5 to 2-year modified duration as the best choices.

Axis Corporate Debt Fund, HDFC Corporate Fund and Aditya Birla Sun Life Corporate Bond Fund meet his criteria.

Savings With Maturity Of More than Three Years

Chadha said investors with such a time horizon can take the benefit of indexation. He recommends the Bharat Bond ETF, corporate bonds with higher coupons and RBI Floating Rate Bonds 2020.

Bivalkar said those with an investment horizon of five years or more should invest in equity funds as the returns would be far better.

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