Last updated: 06 Aug, 2020 | 09:24 am
The credit risk, interest risk and liquidity risk are extremely serious in the system. It is very important to understand them before making any decision. Invest only high-quality AAA-rated bonds as they have the least risk. In fixed income securities, high risk does not mean higher returns.
There is a significant tax advantage in holding a debt fund for more than 3 years.For a more than 3-year investment horizon, an investor should prefer short duration (duration < 3) fixed income instruments over long duration. Short duration funds might not give you that extra alpha in the short term (3-6 months), but they are highly likely to outperform long duration funds in the long term. Shorter duration funds are also less sensitive to volatility in interest rates as compared to long-duration funds.
Have more questions on the issue? Click on the Ask Advisor button to connect with your family wealth office to help you understand more about the current risk in the system and help you manage your portfolio.