How to navigate the uncertainties in the debt mutual fund space

By Rushabh Desai

Many mutual fund investors and analysts are gung-ho about the YTMs (yield-to-maturity) of debt mutual fund schemes. A recent analysis that I did revealed that the YTMs haven’t worked in the investors’ favour. No scheme is giving you 8-9% returns, because of the defaults and downgrades. In fact, many categories and schemes are offering just 4-5% annual returns.

This brings us to an important point: the asset allocation. Debt mutual fund investor have been ignoring this important aspect for very long because they believe (wrongly) they need to have some allocation to debt just to balance their equity exposure. 

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