Why Did Franklin Templeton Decide to Wind Up Six of Its Debt Funds?
Franklin Templeton India decided to wind up six of its debt mutual funds on April 23, 2020, citing severe liquidity challenges in the bond market due to the COVID-19 pandemic. The affected schemes were: Franklin India Low Duration Fund Franklin India Dynamic Accrual Fund Franklin India Credit Risk Fund Franklin India Short Term Income Fund […]
What Are Segregated Portfolios (Side Pocketing) in Debt Funds, and How Do They Protect Investors in Case of Debt Defaults?
Segregated portfolios, often referred to as side pocketing, are distinct portfolios established within a mutual fund to manage specific debt securities impacted by credit events such as downgrades in credit ratings or defaults by issuers. This approach was implemented by SEBI in December 2018 to protect investors in mutual funds in debt. Side pocketing serves […]
How Do Credit Ratings Work in Debt Mutual Funds?
Credit ratings in Debt Mutual Funds are crucial for evaluating the risk linked to the bonds and debt instruments held within the fund. These ratings, assigned by agencies such as CRISIL, ICRA, and CARE in India, reflect the creditworthiness of the issuer, whether it’s a corporation or a government entity. The ratings typically range from […]
What is the Difference Between Corporate Bonds, Corporate FDs, and Debt Mutual Funds?
Aspects Corporate Bonds Corporate Fixed Deposits (FDs) Debt Mutual Funds Description Debt instruments are issued by companies to raise capital with fixed or floating interest rates. Fixed-term investment is where you deposit money with a company for a specified interest rate over a set period. Mutual funds that invest in a mix of debt instruments […]
What’s the Difference Between Floater Debt Funds and Dynamic Debt Funds?
Let’s learn the difference between Floater Debt Funds and Dynamic Debt Funds. Here’s a simple explanation: Feature Floater Debt Funds Dynamic Debt Funds Investment Strategy Invests in debt securities with floating interest rates that adjust periodically. Invests in a mix of short-term and long-term debt instruments based on market conditions. Interest Rate Sensitivity Less sensitive […]
What Are Credit Risk Funds? Are They Risky?
Credit Risk Funds are debt mutual funds that invest in bonds, debentures, and other debt instruments issued by companies with lower credit ratings (below investment grade, or “junk bonds”). These funds aim for higher returns by investing in riskier corporate bonds that offer higher interest rates to compensate for the increased risk of default. While […]
What Are Gilt Funds and Are They a Good Investment for You?
Gilt funds are debt mutual funds that invest primarily in government securities like Treasury Bills and bonds issued by the central or state government. These funds are considered safe because they do not carry credit risk, as they are backed by the government. However, they are highly sensitive to interest rate changes—when interest rates rise, […]
How are Debt Fund Returns Taxed?
A mutual fund that invests at least 65% of its assets in debt securities like bonds, government securities, or money market instruments is classified as a debt mutual fund and qualifies for debt fund taxation. Due to changes in tax rules, the tax rates vary depending on the conditions under which the mutual fund was […]
How Are Debt Funds Different from Bank Fixed Deposits?
In India, Fixed Deposits (FDs) are popular for their simplicity, safety, and guaranteed returns. People prefer them for their fixed interest rates and capital protection. However, many investors think that Bank FDs are better than Debt Funds. Let’s explore their differences in terms of returns, liquidity, and tax treatment to make an informed choice. Aspect […]
Are Debt Funds a Safe Investment?
Debt funds are generally considered safer than equity mutual funds because they don’t invest in equity. However, they are not completely risk-free. There are certain risks that debt funds face, and each type of debt fund carries these risks in different amounts. Let’s understand them: Credit Risk: If the issuer of the bond defaults, the […]