Amid the bull run, why should you invest in long duration debt mutual funds? An explainer
on an upswing and investors are encouraged to lock their investment in these deposits, one can explore the prospect of investing in another financial instrument i.e., debt mutual funds particularly the long duration ones. Although debt schemes became relatively less attractive in early 2023 after the phasing out of indexation benefit in Finance Bill 2023, the investors still opt for them for the assured returns they offer. Experts argue that the ongoing bull market has triggered the need for portfolio rebalancing which means investors are recommended to sell some of their equity assets and redeploy the proceeds to buy debt schemes so that their predetermined equity-debt ratio remains intact.
Deepesh Raghaw, a Sebi-registered investment advisor, in a recent interaction with Livemint pointed out, “Investors should check their portfolio and if it's highly skewed in favour of risky assets, then it is recommended to reduce the allocation. There are a total of seven schemes which fall in the category of long duration mutual funds. Total assets under management (AUM) of long duration debt funds amount to ₹9,875 crore, as on Nov 30, 2023.
Out of this, more than ₹149 crore was invested in the month of November alone. It is vital to note that long duration funds’ AUM is far less than that of short duration and medium duration debt schemes, which have an AUM of over ₹one lakh crore and 26,598 crore, respectively. Let us first understand what long duration mutual funds are.
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