Fixed Income Funds: Ideal For Goal Based Investing

In the current economic situation, fixed income is no longer only used to hedge an investment portfolio that is heavily weighted in equities or alternatives, but has become a highly valuable component of a balanced portfolio. Fixed-income investments are now available. Investments with a fixed rate of return are known as fixed-income investments. The amount of the return could vary though.

Your risk tolerance is influenced by your investment tenure. A key success factor in achieving your investment goals is asset allocation. Investors should focus on the shorter end of the yield curve in a scenario when interest rates are expected to rise. This is due to the fact that when interest rates rise, the mark-to-market impact on the short-term section is quite small.

Duration based investing

Invest in fixed income funds such as overnight funds, liquid funds, or ultra-short duration funds if your investing horizon is relatively short like a few days, weeks, or months. You can invest in short-duration funds or funds with a duration profile of under three years for investment tenures of one to three years. If your investing horizon is longer than three years, you might want to think about investing in corporate bond funds, Gilt funds, and banking and PSU debt funds. Additionally, if you take modest risks and have a two to three-year and more investment horizon, you might want to think about investing in Banking & PSU Debt Funds and Gilt Funds.

If your investment is not driven by the duration of other factors such as Retiring soon or getting a corpus, planning to buy a house, getting a bonus etc., then the investment choices can vary. Fixed Income Funds come with different risk levels, Investment tenure and needs. These funds offer products that help meet one or more of the investment objectives.

Investing as we age

The way we allocate our assets changes as we age. The maximum allocation should be in stocks when one is young, but as one age, the maximum allocation should be in debt. Finally, after retirement, the maximum allocation should be in debt. The greatest investing options for retirees are ones that have low levels of risk and offer some form of income. If you are looking for solution-based funds you can invest in funds like Retirement funds and Child Funds, which can enable you to reach your financial objectives automatically.

Fixed Maturity with high return

We all have unique ways of managing our investments. Some investors prefer to manage their investment portfolios themselves. Some investors might be more passive than others. Investing for a fixed maturity period but not in FDs then you can opt Fixed Maturity Plans- Debt. FMPs are the best option for investors who require returns above those of a standard FD but are willing to put up with the frequent NAV volatility. FMPs are lower risk/lower return investments than equity funds.

Conclusion

For each investment aim, you should first determine the investment target, time horizon, risk tolerance, investment style, and liquidity requirements. Next, you should determine the appropriate mutual fund category that will satisfy these investment factors.

Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.