Most mutual fund investors stick to liquid funds, ultra-short term funds, short term funds, bank and public sector company funds, corporate funds, etc. for their short-term needs. Most of them may be aware of government debt funds, though they may not invest in them. However, many investors are not aware of medium duration funds. Most people are likely to keep hearing about medium duration funds this year because most mutual fund advisors are recommending these schemes to their clients these days.
Read also | Best Government Bond Mutual Funds to Invest in August 2024
According to Sebi mandate, medium duration funds must invest in debt and money market instruments with Macaulay’s duration three to four years. As you can see, these plans are suitable for investors looking to invest for three to four years or more. However, you should check the plan’s portfolio duration to ensure that the plan is in line with your investment horizon.
Not a public favorite
Most mutual fund advisors do not recommend medium- and long-term debt schemes to regular investors. These schemes are extremely sensitive to changes in the interest rate environment and suffer when rates rise. Mutual fund advisors say that many conservative investors would find it difficult to handle the volatility that these schemes face.Read also | Banking mutual funds vs. technology funds: which one to choose?In short, if you are looking for a debt mutual fund where you can park your money for four years or more and are willing to take some risk and volatility, you can consider investing in medium-term funds. Keep an eye on monthly updates so that you can keep track of your plans. Bandhan Bond Fund Medium Term Plan, one of the recommended plans, has been in the fourth quartile for the last 13 months. The plan had been in the third quartile earlier. HDFC Medium Term Debt Fund It has been in the third quartile for the past 10 months.
The best medium-term plans to invest in August 2024
Methodology:
ETMutualFunds has used the following parameters to select the debt mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.
2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.
i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.
ii)When H < 0.5, the series is said to have mean reversion.
iii) When H > 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.
3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days needed to calculate the relationship
Downside risk = square root of Z
4. Superior performance: Fund performance: benchmark performance. Daily cumulative returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.
Asset size: For debt funds, the limit asset size is Rs 50 crore.
(Disclaimer: Past performance is no guarantee of future performance.)
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