I would like to park Rs 4 lakh in around 4 debt funds. I would like to invest in 1 gilt fund, 1 long-term bond fund, 1 dynamic bond fund and 2 short-term liquid funds. I need the short-term funds because I might have to liquidate if the need arises in 3-6 months. Please advice.
-Satish
Short-term funds have had an outstanding year, but we are not sure if the same performance will be sustained in the coming times. However, they're unlikely to disappoint and go down in value. You can choose to invest in UTI Short Term Income fund and IDFC SSI Short-term Plan.
As far as long-term gilt funds are concerned, we would urge you to not invest in them. While there is a consensus of a rate cut, we don’t know when and how it will happen. We had taken the views of debt fund managers in January, and those have changed radically over the next few months. Even the RBI’s action is completely different from what was expected. So, given the flux around inflation and the macro-economic scenario, it’s very difficult to bank on a successive rate cut. We would suggest you avoid gilt funds and invest in dynamic bond funds.
This article was originally published on May 22, 2012.
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