Federal Reserve may hike rate and its impact on Debt Mutual Fund

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The Federal Reserve is likely to hike interest rates in December. That raises a big question in the mind of debt mutual fund investors: when the USA is going to hike rates, will Reserve Bank of India cut rates? A rate cut is a happy news for debt mutual fund investors, especially in long-term debt mutual funds. When yield falls, bonds prices rise, pushing up the Net Asset Value (NAV) of the schemes. That is why a pause or rate hike is not music to debt mutual fund investors.

 

hose who are already invested should continue with their investments. Fence sitters can consider making investments at the current yield. Bond yields have moved up in the money market after a series of bad news, notably the news on additional expenses by the government. The 10-year government bond is currently quoting at 6.66 per cent.   

According to mutual fund advisors, investors should not alter their investment plans based on market movements or news. They argue that investors should always choose schemes based on their goals and investment horizon.

Debt mutual fund universe offers a host of investment options --

liquid schemes, ultra short-term schemes, short-term schemes, dynamic bond schemes, credit opportunities schemes, gilt schemes, etc -- to investors.

It is important to choose the right option based on one's goals, investment horizon and risk profile.

Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich

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Aditya Birla Sun Life Frontline Equity Fund

Birla Sun Life Frontline Equity Fund

• Fund Manager: Mahesh Patil
• Process: Plying a benchmark-aligned process, the manager scouts for companies with good growth prospects.
• Performance: The fund has delivered a solid showing on the risk/return front over the long haul.
• Expense Ratio: 2.27%
• Minimum Investment: Rs 1,000

A skilled manager and his well-executed investment approach make this fund a compelling choice for investors.

Manager Mahesh Patil is evidently mindful of the benchmark S&P BSE 200 Index while investing. For instance, he invests largely in stocks chosen from the index. Also, he loosely aligns the portfolio's sector weightings with those of the index. But that has not resulted in a benchmarklike showing. Under his watch (November 2005-November 2016), the fund (17.22% annualised) has bested 96% of its peers. Year on year, too, Patil has ensured that the fund has delivered consistent returns.

Its success can be attributed in no small measure to Patil's deftly implemented investment approach. His stock-picking has been impressive. A growth bias is apparent as Patil focuses on factors such as ROCE, ROE, and earnings growth potential. Despite the benchmark-awareness, Patil is no closet indexer, as he is willing to deviate substantially from index weightings in individual holdings.

Patil has also used his understanding of market movements and stock price points skilfully. Tactical plays and a buy/sell pattern within long-held holdings are integral to the approach. But some caveats are in order. In an upturn that is not broad-based--in other words, when some sectors gain significantly more than others--the benchmark-consciousness may cause the fund to underperform peers that invest in an unconstrained manner. Also, tactical plays add an element of timing risk.

Then again, evidently Patil is at ease with the investment approach. He has plied it with skill across market conditions, and we draw extra comfort from his stock-picking prowess. Our confidence in the fund's ability to deliver pleasing results over a market cycle has grown. 

Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich

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How to Invest for people who are 50 years and above

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Long-term view should be a serious consideration for people close to retirement

Long term has a very serious meaning for people who are close to retirement. They really need to have a long-term orientation. You should have a short-term orientation for your income requirement.

Let's assume that somebody is 50 years old and he has been able to accumulate Rs 50 lakh as his retirement corpus. If he retires at 60 and moves his entire capital to fixed income, the capital will remain constant and he will start consuming the income.

It is more important for a person at 50, who will retire in 10 years time, to take a long-term view with the money from which you don't intend to derive income. You should be investing in a vehicle which is a mix of equity and bonds and if you are able to withdraw only 4-5 per cent annualy, there is a possibility that the capital will grow.

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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L&T Tax Advantage Fund

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L&T Tax Advantage Fund

We had only two equity-linked savings schemes (ELSS). So, enter L&T Tax Advantage Fund , earlier known as Fidelity Tax Advantage Fund. L&T Investment Management Ltd has also turned around and it's time to put more money behind these fund houses. We bring three of L&T Investment Management's schemes in Mint50 this year.

L&T Tax Advantage Fund is an ELSS. It offers section 80C tax benefits up to Rs1.5 lakh and therefore comes with a 3-year lock-in. Fund manager Soumendra Nath Lahiri, who is also the fund house's chief investment officer, doesn't churn his portfolios frequently. Its portfolio turnover ratio is at a lowof 30-38%. L&T Tax Advantage Fund returned 18.62% and 22.41% in the last 5 and 3 years, respectively. Lahiri expects the economy to pick up and has invested accordingly, with high allocation to banks, construction projects, industrial products and the cement sector. "Government spending will continue in infrastructure areas where it is present like defence sector, roads and railways.

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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NPS offers No assurance on Returns

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Trade unions have opposed the NPS because it does not offer assured returns. In fact, it should not be called a pension scheme because pension is not defined. NPS may be looking good right now because markets have done well. But this could change dramatically if there is a downturn. Some funds of the NPS have given barely 2% returns in the past one year. If equity markets crash, the returns could be in the negative. What happened in 2008 could get repeated.

If an investor retires in a black swan year, he will have a corpus much smaller than he planned for. What if the bearish phase extends for 5-10 years? Will he be able to survive without his pension just because markets are down? A 25-year-old may be able to wait it out for the markets to bounce back, but a retiree does not have the luxury of time. This is why investors want some kind of assurance in the income during retirement. Unless the NPS offers an assurance of positive returns, investors s ..

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

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