[adithya.kp]

I think this is the 3rd type of risk which is often overlooked in good times. That is the redemption risk. I read there has been a lot of redemption in liquid funds. ( Apart from panic selling, a lot of companies would have redeemed due to the need). Volume of trade is very low. A lot of them didn't even trade. So naturally the fund house is forced to do a distress sell of whatever they could. ( This has another side effect of leaving the remaining unit holders with more risk. Since only the good quality papers get sold)

Originally Posted by SmartCat

Does not mention any specific risks, but general gyaan about risks in debt mutual funds:

Debt funds face risks of default, liquidity amid Covid-19 scare
https://www.livemint.com/money/perso...073815488.html

[srsrini]

Originally Posted by arindambasu13

...

Most financial advisors state that one should maintain status quo and keep going with their regular SIPs. After a point in time, the market WILL correct itself (though it may be a long time) and if one is prepared to invest over a 6-8 year horizon or longer, there is no cause to worry. These are cyclical events which happen every once in a while, and the market corrects itself gradually to even out returns to the investor.

....

A good financial advisor should look at the entire set of investments, the time for goals, and many other things, before giving a comment on staying with equity. It is easy enough to do this for one's own client. (Disclaimer: I am an advisor myself.) However, there is no way to make this generic for all. Heck, different people have very different ideas on what is long term and what is not. While there are good points in the text - cyclical, 6-8 years, etc. - it still needs to be applied to a specific person's situation before it can be called advice.

Originally Posted by hothatchaway

Please help understand how to identify long/short term for a particular Gilt fund. Is it the average modified duration?

It may be safe to assume that most gilt funds are long-term. Yes, the Maculay duration would give an idea of this.

Aside: There was a mouth-watering 1 year gilt fund, but that went away in 2018.

Originally Posted by skchettry

Thanks for the advice. Yes, it looks like I need to revisit my strategy although there is a slight comfort for me in the sense that I have been in the SIP mode since last 12-13 years.

I know that this does not change the past. Please note that a plan should have a mix of equity and debt, and there should be more debt when the goal is nearer. Please implement this for later goals.

Originally Posted by Rachit.K.Dogra

I have a question on the best instrument to use to purchase mutual funds.
1) I already have mutual funds from SBI and ICICI and have a mutual fund account with them. So if I have to buy funds I should buy directly from these websites? OR
2) I am a CAMs registered user and have an account with them too. So any mutual fund that CAM manages should be brought through their website/app?? OR
3) I have a demat account and I should use demat account to buy 1 time units or SIPs?
....

Thank you

I believe option 3 has been 'trashed' earlier. In particular you can't really set up a SIP with demat. zerodha does an internal nifty thing to give an impression of SIP.
Working with AMCs is the most suitable. There is no third-party that can abstract and miss out things. The con is that you need an account for every AMC that you transact with.


Similarly for CAMS - you would need an account with KFintech (erstwhile Karvy) to transact on funds served by them.



In any such specific platform, getting an overview of all your investments becomes difficult, You can get the CAS and view the portfolio in VRO, etc.

Originally Posted by mac187

In addition to these questions, can the experts also shed light on some good funds (non-tax savers) for long term holding 3~5 years.

While there can't be a generic adivice... 3 to 5 years is quite unsuitable for equity. In debt funds, the typical advice is to match the horizon with the duration, but this is not fully correct. For 3=5 years, you may want to consider a short-term or low-duration fund, with high credit quality.

[carboy]

Originally Posted by srsrini

Working with AMCs is the most suitable. There is no third-party that can abstract and miss out things. The con is that you need an account for every AMC that you transact with.

MFUtility allows to SIP in to all AMC Direct Funds. It's a platform established by AMCs.

[huntrz]

Most of the liquid funds' graph shows a dip after 16th March. Any idea why? Does overnight funds offer better capital protection than liquid funds?

[SmartCat]

Today's RBI rate cut of 75 bps means gilt fund NAVs will shoot up. Expect around 2% increase in tomorrow's published NAV. This can be "predicted" by looking at prices of 10 Yr Govt Bond yield
https://in.investing.com/rates-bonds...ear-bond-yield

Note: If bond yield falls by 2%, gilt fund NAV goes up by roughly 2% (exact number depends on various other factors). And vice versa.

Originally Posted by huntrz

Most of the liquid funds' graph shows a dip after 16th March. Any idea why?

Check this article:
https://www.livemint.com/money/perso...073815488.html

Large corporates are withdrawing funds, forcing liquid mutual funds to sell at whatever price the short term bonds are trading at. Hence the tiny fall in NAVs.

Does overnight funds offer better capital protection than liquid funds?

Absolutely. But expect 0.5% per annum lower returns over time.

[hothatchaway]

Originally Posted by SmartCat

Absolutely. But expect 0.5% per annum lower returns over time.

The portfolio of most overnight funds consist TREPS or reverse repo which act as collateral. Would you have information about what the underlying security of the TREPS are? Are these sovereign bonds or corporate debt?

[SmartCat]

Originally Posted by hothatchaway

The portfolio of most overnight funds consist TREPS or reverse repo which act as collateral. Would you have information about what the underlying security of the TREPS are? Are these sovereign bonds or corporate debt?

Overnight fund is equivalent to 1 day bank Fixed Deposit. You are lending your money to banks for a day and collecting interest.

[hothatchaway]

Originally Posted by SmartCat

Overnight fund is equivalent to 1 day bank Fixed Deposit. You are lending your money to banks for a day and collecting interest.

What I wanted to understand is who are the borrowers that the overnight funds lend to. For example, a big chunk of a liquid funds portfolio is invested in commercial papers of corporates and banks. The portfolio section of overnight funds on VR is blank. Moneycontrol lists the portfolio as TREPS and/or reverse repo. I read up on what these are. Could not find more details on what the underlying security in the reverse repos are. Ideally, it should be government securities.

[rayjaycleoful]

Is there a penalty on Zerodha for not having balance for SIP orders?
Missed adding cash for an SIP and I see 80rs missing from my account. Where can I view a statement of this transaction?

[saket77]

I don’t know about Zerodha but your bank may charge penalty towards ‘bouncing charges’.
Check your bank statement.

[SmartCat]

Originally Posted by carboy

Historically, index funds have outperformed a huge majority of managed funds for decades in the USA.

Motilal Oswal is launching S&P 500 Index fund in India
https://www.livemint.com/money/perso...506354495.html

They already have NASDAQ ETF
https://www.valueresearchonline.com/...ge-traded-fund

[vharihar]

Can someone explain to me how/why exactly do the NAV of debt funds move? I've read wiki kind of explanations of debt funds (viz. They invest in govt bonds, etc), but never ever understood the reasoning behind why it's NAV moves. After all, the interest yielded by such bonds and commercial paper is a fixed APR, isn't it? So what exactly is the reason behind their NAV appreciating/depreciating?

Links like the following seem to indicate that now might be a good time to invest in debt funds:

https://www.bloombergquint.com/mutua...n-debt-funds-2

Any thoughts about that?

[SmartCat]

Originally Posted by vharihar

Can someone explain to me how/why exactly do the NAV of debt funds move? So what exactly is the reason behind their NAV appreciating/depreciating?

Just like stocks, bonds are traded on NSE everyday. Just like stocks movement, bond movement too depends on actions of buyers and sellers (aka supply and demand). That's why NAV of debt fund moves everyday. NSE website link for bonds trading data:
https://www1.nseindia.com/products/c..._bonds/cbm.htm

Individuals can invest and trade in bonds too at https://goldenpi.com/. This platform is owned by Zerodha. But minimum investment is too high.

After all, the interest yielded by such bonds and commercial paper is a fixed APR, isn't it? Any thoughts about that?

Refer to this post where I take the example of gilt funds. Bond funds work the same way too

Originally Posted by SmartCat

Let me try to simplify how gilt funds work.

• In January 2020, let's assume that you invested Rs. 1 Lakh in 5 year bank FD at 8% interest pa. The terminal value of this fixed deposit is Rs. 1.5 Lakhs (total returns after 5 years, in 2025)
  
• Worst case scenario, Coronavirus is raging all across the world. Demand drops and world is in a recession. Crude oil falls to $15 per barrel. Inflation in India is zero because prices of everything has dropped. RBI will slash interest rates drastically, every 3 months.
  
• Let's assume that in Jan 2021, 4 year bank FD offers 4% interest pa. If I deposit Rs. 1 Lakh in the year 2021, I will only get Rs. 1.16 Lakhs in 2025 (terminal value).
  
• But your FD is locked in at 8% interest pa, and has a much larger terminal value in 2025 (Rs. 1.36 Lakhs to be exact, after 4 years)
  
• Let's assume fixed deposits are tradeable. I will approach you and offer to buy the fixed deposit from you, since returns offered are double. If I buy it from you, I will get Rs. 36,000 as interest instead of Rs. 16,000.
  
• You will sell your fixed deposit to me only if I offer a nice premium. But since it is a tradeable market, you will get lot more offers. You will eventually sell your fixed deposit, at say Rs. 1.25 Lakhs. So now, because of the fall in interest rates, you earned 25% returns in just one year.

That's exactly how bonds go up in value when interest rates fall. And vice versa. Bond value crashes when interest rates rise. Gilt funds returned up to 50% returns in year 2009. But then, it crashed 30% the next year, when things returned to normalcy. So before getting into this gilt fund investment business, it is best to understand what you are getting into.

But hold gilt funds for long duration, you are guaranteed the returns (coupon rate) when it is due. Just like fixed deposits. It's just that there is a mini-roller coaster ride in between.

[adithya.kp]

To me, it looks like a typical sales pitch. Funny thing is that, they are asking not to keep checking debt portfolio for the next 6 months or so.
Anyways most of the things they mentioned sound good in a normal environment. But this is not normal environment. IMO, taking risk in debt ( for that additional 1 or 2%) is not not worth it. Personally, I will consider only Overnight, Gilt and Dynamic (If the portfolio is 100% into govt securities. A lot of dynamic bond funds have corporate exposure too) category of debt funds. But in gilt/dynamic you can have -ve returns in the short term. Even after after the rate cut of 75 bps, 10 year yield touched 6.49. ( After touching 6.1) Even this is very volatile.

Originally Posted by vharihar

Can someone explain to me how/why exactly do the NAV of debt funds move? I've read wiki kind of explanations of debt funds (viz. They invest in govt bonds, etc), but never ever understood the reasoning behind why it's NAV moves. After all, the interest yielded by such bonds and commercial paper is a fixed APR, isn't it? So what exactly is the reason behind their NAV appreciating/depreciating?

Links like the following seem to indicate that now might be a good time to invest in debt funds:

https://www.bloombergquint.com/mutua...n-debt-funds-2

Any thoughts about that?

[huntrz]

I have never invested in ETFs, but thinking of investing in S&P 500 ETF from Motilal oswal.
Is there a liquidity issue with ETFs, like say I want to redeem by selling but there is no buyer? Is the sale guaranteed by the AMC running the ETF? In normal Mutual funds I know that redeem always works.

https://www.livemint.com/money/perso...506354495.html
Any view on the above fund?