tag:blogger.com,1999:blog-31922975.post115635929068567535..comments2023-10-26T12:59:48.087+05:30Comments on Simplifying Money Matters: Why debt funds are not same as FDsUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-31922975.post-1156487387612244532006-08-25T11:59:00.000+05:302006-08-25T11:59:00.000+05:30why there is unfound fear attached to debt funds? ...why there is unfound fear attached to debt funds? well, let me try to correlate FD to debt fund.<BR/><BR/>1. In my words, FD is a closed debt fund. (that means it is illiquid until maturity to realize the promised interest).<BR/><BR/>2. let's consider a debt fund that invests only in money market (assume only in g-sec and t-bills), the returns will be closely equal to yield curve. <BR/>And if you check yield curve, the returns are atleast 50-100 points better than prevailing FD rates and there are scores of funds that invest only in money market.<BR/><BR/>3. In order to meet obligations in time, many companies depend on short term debt. Some go for long term debt, instead of diluting equity. CRISIL gives rating to companies having good financial history. These companies also issue bonds! many debt funds invest 20-30% in such bonds and rest remains in govt. backed G-secs. Out of the 20-30% money invested in a diversified market, there are remote chances of messing up, or in worst scenarios losing money. The idea is to make more money than yield curve. Now choice is left to you to read through the print to understand how your debt fund manager is allocating funds across. Most debt fund yield are today more than 10%<BR/><BR/>3. Where a debt fund scores over FD is liquidity, one can enjoy good yieid over a very short time (say one month).Harshahttps://www.blogger.com/profile/00608301156001941089noreply@blogger.comtag:blogger.com,1999:blog-31922975.post-1156403024570498942006-08-24T12:33:00.000+05:302006-08-24T12:33:00.000+05:30Hmm..This is true. What do you think about post of...Hmm..This is true. What do you think about post office savings? Dont they generate higher returns than bank deposits.<BR/>Are their cases where the principal of debt funds are not repayed?Anonymousnoreply@blogger.com