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Is it wise not to invest beyond ultra-short-duration funds for the debt portion of a portfolio? What should be the criteria for choosing an ultra-short-duration fund?
- Aakash
To cater to your fixed-income investments requirements, your non-negotiable, short-term money must be kept in liquid funds. These funds are going to become safer owing to the new regulations introduced by SEBI.
Ultra-short-duration funds are a good avenue and there are no frills there. If you want to evaluate these funds, go to Value Research website, choose a specific fund, go to the portfolio tab and look for the rating break-up.
The starting point shouldn't be the returns. Rather, it should be the risk in a fund because for a fixed-income investor, protecting themselves from downside risk is paramount. A fund with a very high allocation to lower-rated bonds should be avoided. Then, one should evaluate the consistency of returns and I think one will have a reasonable choice there.
This article was originally published on September 04, 2019.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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