Average Portfolio Maturity

In the real world, the average age of a group of people is an important indicator. Be it the average age of the population, an MBA class, a sports team, or even members of Parliament. For debt funds too, a similar concept called average maturity is used. The maturity of an instrument—say, an insurance policy or a bond—is nothing but the time when it matures. It is the length of time till the principal is returned to the security-holder or bond-holder. For example, the RBI Relief Bond has a maturity period of five years, after which the principal is returned to the investor. More specifically, average maturity applies to debt mutual funds. These funds usually invest in a number of bonds and gilts, with each instrument having a different maturity. And since maturity of a security doe

This article was originally published on June 27, 2003.