SIP is a way to invest small amounts of money into mutual funds and create a corpus according to one’s investment horizon – short to long term – in equity or debt. “All the benefits like rupee cost averaging, taking advantage of market volatility continue for debt investments as well. It’s time people accepted SIP in debt the way they have accepted SIP in equity funds,” says Vaibhav Shah, Head Product and Marketing, Mirae Asset Investment Managers (India) Pvt. Ltd.
Debt funds are a type of mutual funds that invest in fixed income securities with little to no exposure in equity markets. Most people in India look at saving through bank deposits for the short term. Debt funds can be placed against bank recurring deposits (RDs) in terms of the maturity period offered. However, investing in debt funds via SIP offers an opportunity to earn better risk-adjusted returns compared to RDs.
3 Reasons why you should consider SIP in Debt
- Investing in small tranches with less risk
- Comparable to bank deposits with better returns
- Ideal way to plan for short term goals
There are different types of debt funds essentially categorised according to their maturity period ranging from 1 year to 5 years. Ultra-short term funds mature in 3-6 months and can be chosen for immediate goals, depending on the risk profile. Due to the low lending duration, ultra-short-term funds are riskier than liquid funds but one of the low-risk category funds when compared to other funds of the same category.
“Everyone is a long term investor, but the moment something happens, they become a short term trader,” feels Financial Expert and Founder, Hum Fauji Financial Services, Col (Retd) Sanjeev Govila.
Govila says investors can achieve their financial goals through SIP in debt depending on the risk profile and funds chosen within the category. “If the risk profile requires a high amount of safety, debt funds are the only way. While choosing debt funds, one must consider the interest rate scenario,” he said during an exclusive webinar on Economictimes.com.
“Banking PSU Funds, Corporate Debt Funds, Bond Funds offer AAA-rated good quality instruments without worrying too much about the portfolio with a time horizon of 3-5 years,” suggested Shah during the session.
The exclusive webinar also talked about misconceptions around SIP in debt funds and how it can help investors generate capital appreciation and achieve goals in the short term. The experts also deliberated on the role of debt funds SIP in asset allocation.
To watch the full session click here.
Disclaimer | An Investor Education Initiative by Mirae Asset Mutual Fund. All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer to the Knowledge Center section available on the website of Mirae Asset Mutual Fund. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
