Amol Joshi emphasizes the importance of debt mutual funds in balancing investment portfolios, shielding against market risks, and providing stable returns. Understanding the dynamics of debt instruments is essential for effective asset allocation and long-term financial growth. Joshi says: "There are some rules of thumb that a debt mutual fund is useful when you have an investment horizon that is spanning a few weeks or months or something that is not really medium or long term."
According to Sebi norms, medium to long term funds have a mandate to invest in debt and money market instruments in such a way that the Macaulay s duration of the portfolio is four to seven years.
Shweta Rajani suggests considering debt mutual funds like target maturity funds and arbitrage funds. These funds offer various benefits such as higher yields, better liquidity, tax advantages, and the potential for additional returns if the interest rate cycle plays out. As there is a possibility of rate cuts as well as bond yields coming down, it is time to go in for a longer duration in the debt funds.