Debt Funds or better say short-term investing funds, that we choose to invest for our short-term objectives and goals. There is a minimum of 15 categories of debt funds which make it a daunting task for investors to choose one or more best suitable categories for their short-term goals, from a wide range of these debt fund categories.

Well, if you are one among those who are finding this task as difficult then avoiding the possible mistakes can help you pick up the appropriate funds category to invest for your short-term needs. Let us look at the mistakes that you must avoid while planning your investment in Debt fund categories.

Not Specifying Your Purpose

Investors have a lot of purposes to invest in debt funds, some investment to get some stable allocation for generating regular income, while some invest in funds, to balance their portfolio risk and add some long-term fixed income allocation to their overall portfolio. Some also invest in funds for a very short period with only objective, stable returns at low risk.

Specifying your goals to invest in debt funds is necessary, it helps you choose the right category of debt funds to invest. If you don’t specify the goal, you will end up picking the wrong match of debt category fund for your goal. For example, a short-term income fund which in turn invests in debt securities with a 2 to 3-year maturity will not suit your 3-month investment requirement.

Making Returns As Your Prior Goal

Debt funds are mainly meant for stable returns at low risk, if you choose to invest in debt funds for high returns, that means you need to choose funds with a higher risk in the portfolio. This high return can come at the cost of the quality, which can also lead to losses.

Thus, when you are choosing to invest in the debt fund category keep it simple and confine your objective to stable returns. Look at picking schemes with a high-quality portfolio, even it comes at the cost of return.

Ignore The Average Maturity Of The Portfolio

Do not forget to check the average maturity of the debt scheme portfolio where you are planning to invest. Generally, a short-term income fund should have an average maturity between 2 to 3 years, however, there are funds that have a lower maturity period than this and also funds that have a higher maturity period than this. If you choose funds with a lower maturity period than 2 years, you will end up receiving very low returns and if you choose funds with a higher maturity period than 2-3 years, there are chances of an increase in volatility in returns over the period of your investment.

Debt funds are not similar to Fixed Deposits. People prefer debt funds more because they want efficient returns at low risk. If still you are finding it difficult for you to choose the appropriate category of debt funds for your investment portfolio, I would suggest you consult a primewealth financial adviser team.

Also Read: Growth MF Or Dividend MF – Where Do You Pay High Tax?

3 Mistakes You Must Avoid While Picking Up Debt Funds Categories!

What is Lorem Ipsum? Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

Why do we use it? It is a long-established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem Ipsum will uncover many websites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

Where does it come from? Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of “de Finibus Bonorum et Malorum” (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, “Lorem ipsum dolor sit amet..”, comes from a line in section 1.10.32.

The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

No posts found!