Mutual Fund Investment Strategies: How to Benefit from Rising Interest Rates

Mutual fund investment strategy: Amid the rate hikes by the Reserve Bank of Turkey (RBI), mutual fund investors are busy speculating about its impact on their returns. Such a regime of interest rate hikes can affect the returns of equity mutual funds in the short term, such as six months to two years, according to tax and investment experts. However, for long-term equity mutual fund investors, it won’t have much of an impact on their returns as the market will cover its losses in the medium to long term. Experts say that short-term investors, with a period of 6 months to 2 years, should invest in debt mutual funds, especially liquid funds, money markets and bonds. They say such funds are expected to generate an additional 0.50 to 1% from their current average annual return.

About how one mutual fund Investors can benefit from this hawkish interest rate regime, said Vinit Khandare, CEO and Founder at MyFundBazaar, “Every portfolio should be tilted more towards funds with maturities of less than two years in a rising interest rate scenario For an investment month or less switch to an ultra-short term bond fund Invest from a month to a quarter switch to a money market fund factoring is up 200 basis points in repo rates over the next two years, with the final repo rate at 6% One-year yields are trading between 5.10% and 5.20% He said that floating rate funds can move to new issues of securities with higher interest rates Those with longer maturities might consider the fund’s maturity target.

Regarding the adjustment of mutual fund investment amid RBI hawkish interest rate hikes, Palka Arora Chopra, Senior Vice President at mastertrust said, “With interest rates set to rise due to inflationary spirals As a result, forces investors have to adjust their existing debt fund portfolios and make new investment plans based on absolute time horizons Tend to benefit from rising interest rates, a prudent investor should stick with short-term debt portfolios such as – liquid funds and money markets.Investors may consider dynamic bond funds that hold longer time horizons and higher risk tolerance. , maintaining the flexibility to respond to the ever-changing macro environment.”

Regarding the expected return one can expect from debt funds in the short term, said Sandeep Bagla, Managing Director at Trust Mutual Fund, “Any debt mutual fund with maturities up to two years has a can offer interest rates significantly higher than liquid or overnight funds, potentially delivering near 4.75% to 5% interest income with low volatility A bank and debt fund PSU has an active portfolio yield of 6.80% to 7% and a two-year maturity balance with a top quality portfolio.Hopefully these funds will do pretty well over 3 years. -6 months. “

Regarding the debt mutual funds one can think of investing in after the rising interest rate regime, Pankaj Mathpal, MD & CEO at Optima Money Managers listed the following funds:

1]Aditya Birla Sun Life Money Manager Fund;

2]ICICI Prudential Short-Term Fund;

3]Nippon India Short Term Fund; and

4]SBI Savings Fund.

Pankaj Mathpal of Optima Money Managers says that debt mutual funds can deliver between 0.50% and 1.0% more than their average annual return over the next 6 months to two years.

Disclaimer: The views and recommendations expressed above are those of individual analysts or personal finance companies, and not those of the Mint.

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