Should I invest in debt funds because the markets are faring badly? Is it wise to switch our investments from equity diversified to debt funds when the equity market is falling?
- Ramesh Shankar
There is no correlation to prove the relationship between debt and equity which indicates investing in debt funds when equity markets are not faring well. The two categories of investments depend on two different factors, while equity funds depend on state of the stock markets; Debt fund performance primarily depends on interest rate movement. As both debt and equity form different asset classes, it is advisable to arrive at an appropriate asset allocation between equity and debt that depends on an individual’s risk profile and investment needs.