How many debt funds should I have in portfolio?

“Depending on whether your goals are short, medium or long-term in nature, you can invest in equity, debt or a combination of equity and debt funds for certain goals. Usually, 8-10 funds are enough for most investors to plan for their goals,” says Nisreen Mamaji, founder, MoneyWorks Financial Services.

When a person is investing in debt mutual fund what is the primary objective good returns?

The main reason to invest in debt funds is to earn interest and capital appreciation in form of increase in NAV of your units. Debt mutual funds are for people who, prefer relatively less risky and less volatile asset class as compared to equity do not want to take a lot of risks.

What is the best way to create a mutual fund portfolio?

Keeping a long-term outlook is always a sound policy.

1. Use a Core and Satellite Portfolio Design.
2. Use Different Types of Fund Categories for the Structure.
3. Know Your Risk Tolerance.
4. Determine Your Asset Allocation.
5. Learn How to Choose the Best Funds.
6. A Few More Tips and Cautions for Building a Portfolio of Mutual Funds.

What is ideal mutual fund portfolio?

A portfolio with 3-5 mutual fund schemes across different market caps and/or asset classes is ideal.

Should I have debt fund in my portfolio?

If you are not ultra conservative, then debt funds must not be ignored from a portfolio standpoint. However, be cognizant of the inherent risks in debt mutual funds such as interest rate risk, credit risk and liquidity risk which can subject the portfolio to significant drawdowns.

Which category of debt fund is best?

Short-term debt funds may be best suited for those with low to moderate risk appetite. These funds perform best when the interest rates are high. If you have money to invest form 9 to 12 months and have a low-to-moderate risk appetite, short-term funds can be a great investment option.

What is risk of investing in debt funds?

Debt funds suffer from credit risk and interest rate risk, which makes them riskier than bank FDs. In credit risk, the fund manager may invest in low-credit rated securities which have a higher probability of default. In interest rate risk, the bond prices may fall due to an increase in the interest rates.

Which risk do not affect a debt fund?

The biggest cause of worry for debt fund investors is no longer risk of default (credit risk), but risk on account of rising interest rates. Bond prices and yields/interest rates move in the opposite direction, and an increase in interest rates, leads to fall in bond prices.