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THERE are different kinds of variations in debt-oriented funds that are now available for investment in the market. This is a good thing for investors because it provides them with a choice that is far greater than what they were experiencing earlier.
Investors are also able to structure their portfolio effectively by getting the desired exposure in different type of debt instruments through these mutual fund options.
Initial variations: There are several variations that are visible in terms of the instruments that the debt funds use while constructing a portfolio.
This will include instruments like government securities, certificates of deposit, corporate paper and even short-term instruments.
The proportion of these instruments in the portfolio gives a different flavour to the entire portfolio and, hence, this needs to be considered in conjunction with the requirements of the investor when the actual decision about an investment is being made. These are general variations and, hence, provide an overview of the choice of instruments that are present.
In recent times, there are even more options that are being offered and these allow a different kind of exposure. Here, are a couple of such instruments and the knowledge about these investment avenues will help the investor get more out of their debt funds.
Ten-year government securities: There are several instruments that are extremely popular in the debt markets. One of them is the 10-year government securities that are actually used as the benchmark for knowing the yield in the economy. This makes the securities a very liquid instrument and, hence, there is a large amount of liquidity as well as trading that actually takes place.
This makes it a popular choice when it comes to selection in the portfolio of several mutual funds, but often, this might not match the strategy followed by the fund. Now, with a specific fund that is dedicated for this kind of instrument, the choice for the investors increases.
Investors need to know that there will be active management when it comes to this particular security because the 10-year instrument keeps changing at regular intervals as the time period changes. This will require migration to the new 10-year benchmark, which the fund manager will actually take care of.
Investors who want to ensure that they have an exposure to a liquid instrument should be looking at this kind of exposure in their debt portfolio, however, in order to manage their risk, the total exposure should be limited.
Corporate bonds: Another area that is fast developing in the Indian market is the corporate bond space, where there are more and more companies that need financing and they are turning towards the bond market to meet requirements.
The end result of this situation is that there are a lot of bond issues that are being offered in the market and, hence, there is an opportunity for different kinds of investors to earn from these issues.
Earlier, retail investors had limited exposure to such instruments, but, with a separate fund that will concentrate just on this particular instrument and not much more, and hence, this investment avenue will give a specialised exposure when required. At the same time, investors should also look carefully at the exposure to corporate bonds within a normal debt fund to gauge the actual position. On the other hand there is a specific risk with this kind of investment and the investor will have to check the credit rating of the company when they are evaluating the portfolio. These instruments are meant for only those investors who have the ability to take a higher amount of risk that will come with the instrument.
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Some of the Top performing Mutual Funds are
- HDFC Top 200 Fund
- ICICI Prudential Dynamic Plan
- DSP BlackRock Top 100 Fund
- Birla Sun Life Front Line Equity Fund
- Reliance Equity Opportunities Fund
- IDFC Premier Equity Fund
- SBI Magnum Contra Fund
- Sundaram Select Midcap
- UTI Dividend Yield Fund
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