Equity Markets Too Volatile? Invest in Debt Mutual Funds on Kuvera
Global stock markets have been highly volatile since the beginning of the year 2022. Conflicting news in relation to the macroeconomic situation also has not helped the investors. Many small investors have stopped investing in the equity market and are looking for investment options in the debt space.
November 18: Global stock markets have been highly volatile since the beginning of the year 2022. Conflicting news in relation to the macroeconomic situation also has not helped the investors. Many small investors have stopped investing in the equity market and are looking for investment options in the debt space.
However, at present few investors invest in debt mutual funds. Most investors prefer investing in traditional debt products such as fixed deposits over any other investment product.
Debt mutual funds have historically been less volatile than equity mutual funds and have attracted a lot of first time investors given their potential to offer better returns than fixed deposits.
What Are Debt Mutual Funds
Mutual funds are regulated by the Securities and Exchange Board of India as per SEBI regulations debt mutual funds are those mutual funds that primarily invest in debt securities, at least 65% of their corpus has to be invested in debt. There are more than 14 categories of debt mutual funds we have mentioned below a few categories of debt mutual funds along with a brief description:
- Overnight Mutual Fund: They are debt mutual funds which lend to companies for a short duration of 1 business day. The Companies eligible for borrowing are mostly regulated such as banks, insurance companies, mutual funds etc.
- Corporate Bond Funds: They are debt funds that invest at least 80% of their corpus in debt securities having a minimum credit rating of AA. AA is considered as the second best investment rating behind AAA.
- Banking and PSU Mutual Funds: They are debt mutual funds that invest in corporate bonds of only banks and public sector units. Due to the high quality of borrowers the risk associated with them is relatively low.
Benefits of Investing In Debt Mutual Funds Digitally
Low Volatility
Historically debt mutual funds have been less volatile than equity mutual funds, since majority of their corpus is invested into debentures and bonds which offer fixed returns; they are less volatile than equity mutual funds
Convenient Process
Investment in debt mutual funds is easier than ever. New age online investment platforms like Kuvera can help you discover the schemes and you can start investing within minutes after completing online KYC.
Zero Commission Plan
Zero commission platforms do not charge you any commission or brokerage for facilitating investment in Debt Mutual Funds. Typically each mutual fund has two schemes: direct and regular. Regular schemes are distributed/sold through a broker whereas direct schemes are available on zero commissions investment platforms such as Kuvera. In case of regular schemes the expense ratio (fee charged by the mutual fund to the investor yearly) is as high as upto 2% whereas typically the expense ratio in case of direct schemes is around 0.1%. Direct schemes have lower expense ratio because there is no brokerage being paid to the middleman.
How To Invest In Debt Mutual Funds on Kuvera
With wealth management platforms like Kuvera, investing has become easier and more accessible for millions of retail investors. All you need to do is download the app from Play store or App store, sign up and complete the KYC process using your DigiLocker. Now you can select the debt mutual funds you intend to invest in. On the Kuvera app, go to “Invest” and select the relevant fund category. Kuvera displays all pertinent information in relation to each debt mutual fund such as past returns, fund manager, investment objective, investee companies etc.
Founded in 2016 by Gaurav Rastogi (ex Portfolio Manager at Morgan Stanley) and Neelabh Sanyal (former VP at Axis Capital) Kuvera is registered as an Investment Advisor with the Securities and Exchange Board of India. It was launched as India’s first free platform for direct MF investing. It offers over 5000 direct mutual fund schemes of leading AMCs, in addition to other investment options like online Fixed Deposits and stocks. Kuvera offers several unique features like Goal-based investment planning, Tax Harvesting to help you minimize LTCG, Trade Smart to help you switch from commission-laden regular plans to direct plans with least tax impact, easy import of external MF and stock portfolio and even tracking of Gold and EPF investments.