The Mutual Fund Show: Are Bond Schemes Right For You?
A bond fund is for people eyeing a fixed instrument with a relatively short time horizon, say experts.
Given the various schemes on offer, including bond funds and thematic ones, investors may be confused about which one to invest in.
Investors in the lower tax bracket should consider investing in a bond fund such as the Kotak Nifty AAA Bond Fund, according to Vishal Dhawan, founder and chief executive officer at Plan Ahead Wealth Advisors.
He decodes the fund as follows:
An open-ended scheme.
NFO closed on March 26; will trade soon.
Fund manager: Abhishek Bisen.
Anant Ladha, founder of InvestAajForKal, said the fund is best suited for someone who is interested in investing in a fixed instrument with a relatively short time horizon and at a low cost.
"The risk appetite of the fund is very conservative to conservative," said Dhawan. "If you want to participate purely in government security, you can buy a constant security gilt fund."
"If the investor has a time horizon of above three years, then probably an all-season bond fund can be an interesting space, where he can look out for opportunities," said Ladha.
In terms of the recently launched high beta funds by Motilal Oswal—the Nifty Realty ETF and Nifty Smallcap 250 ETF—Ladha said, "It makes sense for an aggressive investor with a time horizon of over seven years."
These are open-ended schemes, tracking the respective indices. The Nifty Realty ETF fund reflects the performance of real estate companies, he said.
According to Dhawan, one should invest in real estate funds when the sector is trading close to peak of its valuations on a forward price-to-book ratio and while "the index is trading significantly above +1 standard deviation".
Now is ideally not a good time to invest in small caps due to their valuations and investors should "trim allocations in the space", he said while talking about the Nifty Small Cap 250 ETF.
He pointed out that "regulators themselves are concerned about the froth in valuations".
Query 1: I am investing Rs 10,000 per month in SBI Energy Opportunities Fund (Direct Growth). I want to know if it is the right fund or should I diversify my portfolio further?
Name: Rabilal Chhetri | Age: 35 years
Ladha: Investing the complete amount in a thematic-based fund can be a bit risky. If he is an aggressive investor, he can probably look at a small-cap fund or multi-cap fund, provided his time horizon is more than five years.
Vishal Dhawan: Investing in one single theme is probably too risky. Diversification might actually serve you better.
Query 2: I am investing in the Mirae Asset Large Cap, Mid Cap funds and along with a few others. They have been underperforming for the last 2 years. Should I book profits or switch to another fund?
Name: Deepak | Age: 32 years
Vishal Dhawan: If someone is a long-term investor, I don't think it is necessary to make changes every couple of years. You need to pare down the mid-cap exposure.
Anand Ladha: Give some time to your fund manager to perform.
