Debt Mutual funds! Year-end 2020: Debt funds have given returns of 10-16% this year, why should one invest in 2021


Debt Mutual Fund: While the equity market has set a new record this year, the returns of debt mutual funds have also improved in the last one year. Investors have received positive returns in every category of debt funds. In most categories, the returns have been in double digits. Talking about different funds, investors have got up to 20 percent returns. However, there has been pressure in its credit risk category. But long-term funds from corporate bond funds, gilt funds and medium have filled investors’ pockets. In such a situation, investors are getting attracted to debt funds once again. The question arises whether the debt funds will also be booming in the year 2021.

How much return in which category

Long Duration Fund: 16%
Mid to Long Duration: 11%
Mid Duration: 7.5%
Short Duration: 9%
Low Duration: 6.5%
Ultra Short Duration: 5%
Liquid Fund: 4%
Money Market: 5.5%
Overnight Fund: 3.5%
Dynamic Bond: 10.5%
Corporate Bond: 10%
Banking & PSU Fund: 10%
Gilt Fund: 12.5%

Why are debt funds gaining momentum

The returns of debt funds have improved because they are an option for fixed income investment. Their focus is on safety, liquidity and better returns. Debt funds mainly invest in securities that pay fixed interest. However, it is not likely that poor performance of debt funds is unlikely. But this happens when securities have low credit ratings, or interest rate movements are negative.

These funds are highly liquid and also safe. The investor can buy and sell the unit as per his convenience. At the same time, your investment in debt funds also becomes diversified. One of the most important factors is that even though debt funds offer lower returns than equity funds, they are becoming an alternative to schemes like FD, RD, NSC or PPF in the current times. Debt funds can get higher returns than these. Looking at the average return of debt funds, during the last 1 year, there has been up to 15 per cent in different categories.

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Will the fast come forward

AK Nigam, director of BPN FinCan, believes that debt funds are a better option for investment in the current market when the market is at a record high. Talking about the equity market, many stocks are at their 52-week high. Valuation of many is over. In such a situation, there may be a profit recovery in equity at the end of the year or in the coming days. That is why debt funds are currently a safe option. Investors should invest money here now. Further, when equity increases again after Correlation, investment can be gradually shifted to equity. He says that now the interest rates are down, there is a fear of correction in the equity, so debt funds are a good option.