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Sip works for debt too

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An SIP into an equity fund is much advocated. Have you ever thought of doing one into a debt fund? It would add to the overall stability of your portfolio.

An SIP into an equity fund is much advocated. Have you ever thought of doing one into a debt fund? It would add to the overall stability of your portfolio.

Published in: Economy & Finance, Business

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  • 1. SIP works for debt tooAn SIP into an equity fund is much advocated. Have you ever thought of doing one into a debt fund?It would add to the overall stability of your portfolio.Author : iFast Content TeamWhile systematic investing in equity has been much touted, the same attention has not beengiven to investing in debt funds. Franklin Templeton Mutual Fund recently came out with a noteon this very topic. Emphasizing the need to have a diversified portfolio, it talks about howinvesting systematically in debt during volatile equity markets has a positive impact on aninvestor’s portfolio.Data was analysed over the period from April 2008 to March 2013 where debt performance wasrepresented by the Crisil Composite Bond Fund Index and equity by the Sensex. Using backtesting data, the tables illustrate how a systematic investment plan (SIP) in debt gives aportfolio stability over time, as against a pure equity portfolio. And, an SIP in debt coupled withan SIP to equity can result in reducing portfolio volatility, on an aggregate basis, compared to anSIP restricted only to equity.Though a point must be made that for the period under consideration (April 2008 to March2013), the equity market has been relatively flat or negative while the debt market has movedfavorably.Performance over 1 yearDebt: Equity portfolioallocationSIP debtreturnsSIP equityreturnsCombined portfolio SIPreturns100:0 9.11 8.06 9.1190:10 9.11 8.06 9.0180:20 9.11 8.06 8.9075:25 9.11 8.06 8.850:100 9.11 8.06 8.06Performance over 2 yearsDebt: Equity portfolioallocationSIP debtreturnsSIP equityreturnsCombined portfolio SIPreturns100:0 9.01 5.57 9.0190:10 9.01 5.57 8.6780:20 9.01 5.57 8.3275:25 9.01 5.57 8.150:100 9.01 5.57 5.57
  • 2. Performance over 3 yearsDebt: Equity portfolioallocationSIP debtreturnsSIP equityreturnsCombined portfolio SIPreturns100:0 8.29 2.87 8.2990:10 8.29 2.87 7.7580:20 8.29 2.87 7.2175:25 8.29 2.87 6.940:100 8.29 2.87 2.87Performance over 5 yearsDebt: Equity portfolioallocationSIP debtreturnsSIP equityreturnsCombined portfolio SIPreturns100:0 7.49 7.16 7.4990:10 7.49 7.16 7.4680:20 7.49 7.16 7.4275:25 7.49 7.16 7.410:100 7.49 7.16 7.16 All the above figures are % All returns computed with SIP starting on the first of each month1-year period: April 2012 – March 20132-year period: April 2011 – March 20133-year period: April 2010 – March 20135-year period: April 2008 – March 2013 Valuation of the portfolio is as on March 28, 2013 with all returns greater than 1 yearcompounded and annualisedBy investing via Fundsupermart, you have access to 41 AMCs in India. Heres why youshould invest via Fundsupermart.com.At no cost to you, the Fundsupermart Mobile Application helps you take charge of yourportfolio with up-to-date information at your fingertipsTo buy and sell mutual funds online, click here.Disclaimer: iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual fundsof any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or bematerially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or saleof any mutual fund. No investment decision should be taken without first viewing a mutual funds scheme information documentincluding statement of additional information. Any advice herein is made on a general basis and does not take into account thespecific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, andlegal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative ofthe future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise.Opinions expressed herein are subject to change without notice. Please read our disclaimer on the website. Please read ourdisclaimer in the website. Risk Factors: Mutual funds, like securities investments, are subject to market risks and there is noguarantee against loss in the Scheme or that the Scheme’s objectives will be achieved. As with any investment in securities, the NAVof the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Pastperformance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. The name of the
  • 3. Scheme does not in any manner indicate the quality of the Scheme, its future prospects or returns. Please read the Statement ofAdditional Information and Scheme Information Document carefully before investing.