So many asset management companies (AMCs) in India are now offering index fund investments in the wake of continued market turmoil stemming from geopolitical tensions and collapsing global economies. The constant tensions in the market have prompted many investors to either withhold their regular SIP investments or withdraw their investments altogether.
Some people are gradually reallocating their earnings to debt fund investments that allocate money to government securities. Though the returns may be low, investors are warming up to them owing to the inherent safety aspect of these funds. However, this also begets the much-asked question, “Is this the right time to invest in these kinds of funds?”
Suresh Sadagopan, MD & Principal Officer, Ladder7 Wealth Plannerssaid, “Such index funds investing in government securities is indeed very good as it gives liquidity throughout, stable returns, participation in a near risk-free product and also allows one to enjoy favourable taxation treatment.”
Prathiba Girish, Founder, Finwise Personal Finance Solutions said, “If an investor is looking for and fixed deposits’ replacement with better taxation, or is looking for predictable sure return at the end of the holding period. it is a good time to invest in these passive Target Maturity Funds. But if someone is looking at making higher returns due to gains when interest rates fall in the future he/she would be better off with active funds.”
Dev Ashish, a SEBI-Registered Investment Advisor and Founder- Stable Investor said, “Passive debt-based index funds are suitable for those when investors can hold the fund till maturity. This gives investors better visibility of the returns that they can expect if they stay invested in the fund till maturity. Further, since the funds have government securities and deposits, the credit risk is minimal and gives comfort. One can consider allocating a part of their debt portfolio if allowed by the proper asset allocation strategy being followed by the investor. Passive debt funds have become popular in recent times as the yields have been rising. This is clearly seen in many new issuances by several AMCs within the passive debt category.”
Deepali Sen, founder partner, Srujan Financial Services LLP said, “These kinds of funds are to be looked at investing not as a flavour/seasonal or tactical fund, but as a fund for strategic reasons. As part of the core debt portfolio meant for the long term. Timing is not what one can ever achieve, but since these funds can have high volatility, SIP or STP make a lot of sense for investing in these funds. SIPs if you are investing regularly and STPs if you have a lump sum to invest in.”
A lot depends on how long you wish to stay invested. Then, comes your risk appetite. Last, but not least, you must check if such investments are in sync with your financial goals. There are pros and cons of every kind of investment; the trick is to realize which one of them would fit into the current and future scheme of things seamlessly.