I have been investing in equity-oriented and balanced mutual funds for about 8 years. I want to buy some debt funds too. What all should I keep in mind while making a choice? My horizon is about 10 years, and this is not for the core part of my portfolio.
—Kautilya S.
If your investment horizon is long, then you need not worry too much about the impact of interest rates on your investment. Having said that, it is indeed a good time to invest in debt funds as the falling interest rate scenario will benefit some classes of debt funds such as dynamic bond funds. But you need to mix them with income accrual funds to ensure that your returns are sustained even after the rate cycle is over.
There are only a few things to keep in mind while making the choice in these two categories. In dynamic bond funds, go with a fund that has a good track record (of not less than 3 years) and has performed well across calendar years. You can consider the period of 2011-16 to see which funds have been consistent.
