Debt Mutual Funds

Since the price of bonds and yields are inversely related long-term debt funds might affect net asset values as yields surge. Therefore it is safer for the investors if they stick to short-term bond funds which mature within a short duration and invest in debt.

Another good option for investors to look into is dynamic bond funds as they decide the duration of the funds based on market conditions. In such case the fund manager has option to switch between the underlying debts instruments depending on the outlook on interest rates.

Rajesh Saluja, managing director of ASK Wealth Advisors says, “One should keep a horizon of at least one year while investing in dynamic bond funds. Whereas, if your investment horizon is about six months, you should look at liquid funds, which invest in short-term debt instruments with maturities of less than one year.”

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