“SIP’s should not be timed and logically when the markets are down one should look to increase the SIP investment. At some point in the next 3-5 years when the markets are high, investors will see the benefit of such investment,” said Maheshwari.
Over the last one month, a series of liquidity tightening measures announced by the RBI to address the decline in rupee against the dollar have resulted in a rise in interest rates and therefore have translated into mark-to-market losses in the returns generated by debt funds over one and three-month period.
The measures are not expected to last for long, as has been communicated by RBI. With that being the case, the medium to long-term debt investors should stay put with their investments and not press the panic button and those looking to make an entry should latch on the opportunity being offered by rise in rates.
The bond yields are very volatile in the current market and therefore investors looking to play on duration strategy (capital gains with fall in interest rates) should be very careful as the uncertainty is very high for the next couple of months on the direction in which the rates move. If the yields go up further then the investor may have to suffer some mark-to-market loss for that period.
The one month return for income fund and short-term income fund stands at (-)0.28 and (-)0.27 per cent. Even as the returns have turned negative for the time being, experts advise remaining invested as the losses are only mark-to-market and those who entered the market with 18-24 month perspective will see their losses recover once the RBI reverses its stance.
In fact, financial planners say that it is a good time to park funds in debt as the rates on offer are high.
“Investors who are looking for assured returns can go for fixed maturity plans both for the short and long term, but those who are looking to take some risk and need liquidity, can go with short and long-term income funds depending upon their investment horizon,” said Surya Bhatia, a Delhi-based financial planner.