A Safe Bet ; Short-Term Debt Funds Have Emerged As an Attractive Investment Option for Investors.

Summary

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With the stock market having run up 82 per cent since March, investing in stocks over the short term is fraught with risk due to the possibility of an imminent correction. When this fact is juxtaposed with the prospects of a flattish interest rate over at least six months, a clear case builds up in favour of short-term debt funds. Here's why: While interest rates are expected to remain volatile for sometime, fund managers believe there won't be any significant movement in any one direction at least over the short term.

This makes it safer to invest in shortterm debt instruments such as liquid plus funds, floaters and short-term debt funds, which according to fund managers are less sensitive to changes in interest rates. On the other hand, a rise in interest rates affects long- term bond funds the most.

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Extract

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A Safe Bet ; Short-Term Debt Funds Have Emerged As an Attractive Investment Option for Investors.

In future, the trajectory of yield curve will be contingent upon three key developments: gover...

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