Best Debt Mutual Fund Guide for Beginners | How to Invest in Debt Funds? | What is Debt Fund?
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- Опубліковано 23 лип 2024
- Good mutual fund investing requires a strong understanding of debt mutual funds. Simply put, a debt mutual fund scheme is one that invests in fixed income instruments like bonds, debt securities, money market instruments, etc. and aims to offer capital appreciation to its investors. In this first of many debt mutual funds related videos, ETMONEY’s Shankar Nath explains the basics of debt fund investing and different types of debt mutual funds which shall become the basis for more advanced discussions
What’s covered in this video?
00:00 Introduction
00:59 What is a bond?
01:24 How debt funds work?
03:41 How bonds are priced?
06:47 Types of Debt Mutual Funds
07:20 Investment Objectives
09:26 Debt Fund Investing Strategy
11:48 Interest Rate Risk
14:18 Credit Risk
16:17 Debt Mutual Fund Returns
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👉 What is the meaning for debt?
Debt means a loan or a liability that one needs to pay back. A number of institutions borrow money to support their financing needs which includes the central government, the state government, banks, NBFCs, infrastructure finance companies, home loan providers and regular corporates.
👉 How does debt work?
The borrower issues a bond and is whence known as the bond issuer. Similar, the person (someone like you) who purchases the bond is the bond holder. A mutual fund acts as a bondholder although other institutions and even individuals can buy bonds.
Every bond has a term or maturity date and most come with a coupon or interest rate. E.g. Bond X is priced at ₹1,000 which has a term of 3 years and offers a coupon of 7% annually
A bond is merely a promise and as it is possible that the bond issuer may not have enough money to pay some or the entire amount, there is an element of credit risk in debt
Similarly, bonds can be traded and there is a thriving exchange market where debt instruments are bought and sold between parties.
👉 How are bonds priced?
In theory, the current price of a bond is simply the summation of its future cashflows discounted back to its present value. This interest rate or discount used in this calculation is more commonly referred to as the bond’s yield to maturity or YTM.
The price of bonds change on account of changes in the YTM or changes in interest rates. It is this interplay between interest rates, bond prices, credit risk etc. that investors and fund managers are constantly trying to master through experience and learning.
👉 Types of Debt Mutual Funds
There are many types of debt funds which can be divided into different buckets per their characteristics. The different types of debt funds are:
► OVERNIGHT FUND
► LIQUID FUND
► ULTRA SHORT FUND
► LOW DURATION FUND
► MONEY MARKET FUND
► SHORT DURATION FUND
► CORPORATE BOND FUND
► CREDIT RISK FUND
► BANKING & PSU FUND
► DYNAMIC BOND FUND
► MEDIUM DURATION FUND
► GILT FUND
► GILT WITH 10Y CONSTANT DURATION FUND
► MEDIUM TO LONG DURATION FUND
► LONG DURATION FUND
► FLOATER FUND
👉 Comparison between Different Debt Fund Types
In this video, we have examined different types of debt mutual funds on the basis of:
► Investment Objectives
► Investing Strategy (Accrual and Duration Strategy)
► Interest Rate Risk
► Credit Risk
► Performance of Debt Mutual Funds
#ETMONEY #DebtFunds #DebtMutualFund
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*Video 2 of Debt Mutual Fund Series* Learn how to read and analyse a debt mutual fund factsheet as we understand terms like Yield-to-Maturity, Average Maturity, Macaulay Duration, Modified Duration and more (Video link: ua-cam.com/video/1BTke9iLuYg/v-deo.html)
Have you released any video explaining the SD of Floater & Banking-psu debt funds? I see a mention of a future video. However, I couldn’t spot one.
Nmvf08th I mmo8
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No doubts , a good way of growing and saving your money is through investing . You don't need to have much before you can invest. "That little money you have now can make you millions if you invest it wisely". I wasnt financial free until my 40’s and I’m still in my 40’s, bought my second house already, earn on a monthly through passive income and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing is a grand choice I made..
Nice one,any investment tip? I would love to know how you made it this far
I initially started my investment journey with the guidance of an investment advisor named Regina Louise Collaro..She's widely recognized for her expertise, so you might have come across her name. Her transparent approach granted me full control of my investments, and her fees are reasonable, considering my return on investment.Now, I benefit from her income strategies every month.Nonetheless, it's crucial to conduct thorough research before engaging with any investment advisor.
I've read testimony of people employing investment advisors to help them become more financially stable, therefore your investment advisor must be pretty good. Would you mind providing more details about this person?
Regina Louise Collaro is based in the United States and can work with anybody wherever they stay. If you would like more information on reaching her, you can conduct a search online.
Personally, I'm blessed and realizing I'm not the only one working with Regina Louise Collaro. I will consider myself lucky. I've been able to feed and make a living through her advice and great work. For such a person as Regina, I owe her gratitude, support and endless prayers as it is not easy to gain access to such a competent and reliable adviser. Who isn't just wise but has all it takes to handle an investment and is good at what she does
Very informative, no body talks about debt. I'm glad you guys did, your video format is simple. Thanks a lot
Thanks for the appreciation.
Now I finally understand about debt funds! You are great speaker!❤️
Glad you found the content helpful
This channel is truly gold. I am hooked. Good, researched, and well put together information without any of the "get rich quick" schemes.
Thank you!
Great to see, editing expert @piximperfect learning Finance !!!
Excellent video, I am looking forward to more videos on the debt fund series..
Everyone is talking about equities, but having a debt portion is important too. We want more videos like this.
@@ETMONEY I am not aware of others' behavior but right now I have a liquid and a short duration fund (1-3 months) along with some SGB on my debt side.
Tbh I never expected this much complexity in Debt funds
Big applause to ET money team , you guys are doing great job🙌🙏
Thank you Ashutosh Madhwani
"This is not a buy it and sell it thing" thanks!
This was a good one. Really informative
This is a real gem, thank you!
Thank you
Great learning and new insight on Debt funds. Looking forward for 2nd Video.
Thank you
Very informative video . Hoping to follow your future videos
Superb video, hope you specifically cover psu and debt funds in future video
Much awaited video. Thanks so much @ETMoney !!!
Thank you. Debt mutual funds is a vast topic so we'll have multiple videos
Wonderful & very insightful video. Thx Shankar , your way of sharing in all videos is commendable.
You're most welcome. Thank you for your kind words
not only financial learning...this channel teaches how to be gentle, wise, sober and a good speaker, ultimately attracting the audiences from start to end...amazing way of presentation
Thank you very much
This is by far the best video series on debt mutual funds
Thank you for your appreciation
Good video, lot of learning. Thanks
Thanks for educating investors
Simply excellent! Keep going..love the informative videos!
Thank you very much
Great Content as usual. Please provide more information on Debt funds and investing strategies around them
Very well Explained,,, I just have one advice to explain it like to a child.... Example, for pranjal kamra videos, I understand them more easily, becoz he uses simple terms and explain about every word he uses in the video,, with good examples..
Most welcome. Some of our videos are on more advanced topics than what Pranjal makes. There is a reason. Pranjal's videos appeal to a lot of not-yet-invested and new-to-investing folks .. and he does a good job of that. Ours (atleast I feel) caters more to people who have a year of mutual fund investing under their belt. While this means less viewers for us, but hopefully we'll be the channel where a lot of Pranjal's viewers graduate into. Hope this is making sense
Thank you sir for detailed explanation :). After this video, I understood that debt fund ivestment is certainly not invest and forget path.
You are most welcome
Nice & clear presentation 👍
Very nicely explained 👏 👌
shankar is extremely clear - one of the best content - kudos.
Thanks
Presentation is always beautiful and great explanation skills !
Thank you
Worth watching, thank you for such a knowledgeable video 🙏🙏
Glad you liked it. Thx
You are doing a great Job.. a service to the nation..
Excellent content with extremely simple explanations ..👌👍
Thank you Rohit Agrawal
Thanks for posting a vedio in english!
By far the best video on debt fund understanding
Thank you
You deserve better viewership. Appreciate your content and efforts!
Thank you very much. Appreciate your kind words. Do share the channel with others so that they too can take advantage of our content
Great work!!!Could you also make a video on roll down strategies pleaseee!!!
As always crisp and clear.
Thanks Yogesh Patil
So shall we not keep part of the emergency fund in liquid debt funds for longer time? Like ET money SmartDeposit?
Nice content. Looking for more such videos in Debt Fund series.
Thx
best video to understand debt funds
Thank you
Very informative. Thanks.
Thanks
Great initiative , thank you and your team for taking all the effort to make a consise and informative video of debt fund . Your narrative style is wonderful and filled with knowledge 👍👍
Our pleasure! Do share the videos you like to your friends and colleagues & spread the word. Thx!
Quite informative ..! Thanks for this initiative..!! Expecting more videos in future on all investing strategies..!
Thank you
Thank you for this informative session. Looking forward to more videos on Financial Planning for "late" beginners (50+ years & above). That's a trick one, I reckon!
Most welcome
Superb video. Thank you! 👍🏻
Glad you liked it!
Thanks a ton, Mr. Sankar Nath for the informative video. Eagerly looking forward to other videos mentioned by you to enhance my financial literacy. With infinite love
Most welcome, Madhavan Venkatachari. Glad you liked this content
Lot of meat in this video and looking forward for the next videos in this series. Shankar makes it interesting
Thank you Jesus Rajesh
Sir please focus more on conclusion with some examples.. like your vdos are great but for an average investors like us please make it more example oriented. And one thing this type of data analysis in nath sir vdos ae amazing and we dont find these any where else
Excellent and well explained..you guys are doing a great job
Thank you
Much awaited series on Debt Funds. Thank you. I am currently confused on what debt funds to add to my long term portfolio to achieve portfolio diversification
Thank you. Yes, that's a pertinent question and a lot of decisioning variables are available in the video. The next video on YTM, Modified Duration etc. will further reinforce the understanding. Hope you like it. Thx
Very informative video with stats....how inflation is related to interest rate ? in upcoming years will interest rate will fall ???
Excellent... as always!
Thank you! Cheers!
In terms of standard deviation for PSU debt funds is it good or worse. As i lost in understanding
The presentation is very good sir.thank you.
Thank you very much.
Excellent video sir. Finally knew the types of accrual based funds and difference with duration fund as there was confusion as even ultra short term can b termed as a duration fund.
very well explain
Very informative
Great presentation as usual .. in-depth and jargons made easy to understand. Keep it up, Shankar. I would like to draw your attention to charts/tables that you use during presentation.. they are too blurred to read and they should be in mobile screen compatible font size. Please look into it
This is amazing!! Thank you
Glad you like it!
Very informative as always. Amazed by your explanation skills.
Thank you for your appreciate Rahul Chanda
Brilliant stuff!
Thx!
Thanks for starting this series. Also thanks for suggesting BCG, it's great. Once Raamdeo Agarwal said he took 20 years to find his investing style. It is really a difficult task. What are aspects do you think a DIY investor should consider finding his investing style easily, safely within a short period?
@@ETMONEY You're right. Could you please recommend some reading materials for such investors?
@@abhijitdebnath9811 A good place to start www.sanjaybakshi.net/media/ (all links not working but most work)
Thanks sir. I shall be happy if you explain whether expense ratio will be charged each time I switch a fund. Although, fund remains within the same fund house i.e. from one scheme to other say equity to debt or vice versa.
Thanks Bhai
credit risk mutual funds are longer maturity or short maturity bonds ?
Do debt funds pay interest to their investor and if they do, where can we find the information about how much interest a debt fund has paid in past years or is it just the difference in the NAV at the time of investing in the fund and the time when you redeem your shares in the fund
Mutual fund is a huge subject and complicated area. After watching this 20mins I return pretty much enlightened. Thank you for the content. Keep making such videos and enlighten the budding investors who are looking for financial freedom.
Glad it was helpful!
Brilliant video! Very informative and so lucidly explained!
Thank you for the amazing video. When is the good time to start SIP in debt funds. If we start when the interest rates are rising; wouldn't it average out on long term horizon?
If you wait for interest rates to get high, then it won't happen. So when you have some money to invest, that's the right time to invest.
Nice video.. please suggest if SIP is good or Lumpsum investment is good in debt funds?
Very Well Explained Shankar.
Thank you very much
Insightful and well explained
Thanks
This video is so informative and precise
Thank you very much
Since the interest rate is expected to increase in future , so its not right time to invest in long duration like gilt funds . Is it right time to invest in short duration funds now or invest in PSU/banking funds or floater funds . Please advice.
If interest rate remain same, then atleast coupon rate can be expected? Currently debt fund yields are pretty bad! Why sir?
Great information
Glad it was helpful!
By far the most toughest topic. Debt funds are often considered very easy to invest but in reality they are very tough than equity
Yes Hareesh Surya. Even we found debt more complex than equity. Too many variables at play here which needs to be addressed by the investor him/herself
@@ETMONEY Considering the complexity and external factorial risk with debt, can you please suggest capital risk free debt instruments?
Sir, would like to have etmoney opinion on the recent SEBI circular regarding Perpetual bonds issued by the banks it's valuation and impact on NAV. I have seen a correction in all the debt funds (Banking and PSU) debt fund. So the regulators change in policy also affects the investors. Please include the same in Part 2 of the video.
Surely we'll present our findings soon on this. Thanks
The % interest rate on a bond is not compounded ?
Excellent... wow
Thanks!
Excellent........wide range analysis. Greetings.
Glad you liked it! Thanks
@@ETMONEY respected sir your each & every word reflects years of study & research. Blessings.
Sir any update on psu banking & floater rate funds? Waiting fr your analysis
super
Nice Explanation 👍
Thanks
Very informative.
Glad it was helpful!
🔴🔴🔴Very informative video 🙏🙏🙏
Thank you
Mr. Shankar Nath, the video is really informative. The way you present the things are quite impressive. Thank you so much for sharing this video.
Does this means investing on bonds are better than investing on debt funds.
Very helpful 👍
Thanks!
This is a great video. It has explained the basics in a comprehensive manner. But I have doubt choosing a debt fund. It says that when interest rate is likely going up opt for short term fund. But they are for short period. If my risk appetite is low to moderate and I am fine with 8-9% return and want to be invested for long term like 5-7 years. Would you suggest me to still go for short term fund in today scenario or I can go for Gilt funds. Please explain.
If you have goal less than 10 years, buy one ultra short term fund. Gilt funds will be used for goals with 30 years.
Way of delivering content is very good 🙂
Thanks!
Sir , if someone is already investing in debt instruments like PPF , EPF , VPF , do they still to invest in debt funds . Also debt funds have indexation and are taxed, so it's always better to have debt instruments like PPF , EPF and VPF which has EEE benefits. Can you please give your feedback.
@@ETMONEY Thanks Sir . Debt funds with average return of 7-8% and with taxes , the effective return will be 6%. So does this justify to be invested in debt funds . Better option is we can go for arbitrage funds which is taxed as equity and 1L return would be exempted . So every year we can get exempted for 1L which serves the short term . Also if someone has also invested for long term in PPF say 10years so his lock in period will be less . So investing in debt fund will not be justified . I am still not sure if debt fund allocation is necessary in one's portfolio. Please advice.
pls make a video on arbitrage funds too
The video is very informative... Appreciate the effort of the whole team...
But your app needs some serious work... There are various issues with the app...
Thanks for the great video.
One thing I find difficult to grasp if whether any of the investment strategies explained here applies to retail investors into a debt MF. Namely, was the suggestion to buy debt MF units when the interest rate are expected to be lowered and vice versa? It seemed like a great strategy for an MF manager to buy and sell bonds based on YTM, interest rate changes etc, but not for a retail investor. Please guide me and if possible state what would be a good investment strategy for Debt MF owners. Another video to capture the detailed would also be great.
Most welcome
Curious to know - have you tried these plays after watching this video and some more research on the Internet? If not, it will be difficult to explain and understand.
I've been using this for over 7 years and it's worked very well. And yes, it took me (also retail investor) 2-3 months to figure things but the rewards more than made up the efforts.
Hi I have invested in 4 mutual funds directly from source account like icici, Nippon, axis, etc, can I track all if them in etmoney like myCAMS please let me know
@@ETMONEY can you tell em steps I am not able to find it anywhere I have my pdf file but there is no any option in EtMoney to upload it please help
What is AA- bond are dey same as AA
Thank you for the video. I have a question. Won't treating a longer term debt investing strategy into multiple short term investments , as suggested in the video, attract a higher net overall capital gains tax , since the difference between STCG and LTCG is 3 years for debt funds.?
Most welcome. There seems to be some confusion here. The approach put forward was to look at shorter duration funds rather than longer duration funds.
@@ETMONEY so the suggestion is to invest in shorter duration funds but how do we decide when to withdraw from a shorter duration fund as it may have tax implication
Fixed deposit r much better than Debt investments.....to protect capitals... To grow the capital Equity investment r the way to go.
hi sir my name is Joydip Nath
and videos is very helpful to understand.... thank you sir
Thanks and welcome
Good information.At present condition where to invest in debt fund which is better than bank fd
Thanks. We'll address some of this in the next video.