Why do short-term debt funds show negative returns sometimes in their weekly performance?
- Shanmugam V
Well, it is simply because of the price movement of the underlying bonds that these funds hold. Just like stocks, even bonds trade on secondary markets and their prices are subject to movements. Now those movements may not be of the magnitude that we usually witness in the equity markets, but they still move up and down. The reasons could be varied like changes in yields or even in the risk perception of a certain type of bonds or the issuers. So, such factors do come into play in enabling those weekly changes in bond prices. But more importantly, the point is that you should really consider short-duration funds for an investment horizon of at least one year or more. If you do that, then the weekly ups and downs do not really matter.