Fund houses have started advising investors to put money in long-term debt schemes through SIPs to tide over the volatility in bond yields.
While fund houses have been promoting investment through SIPs in equity funds for last 10-15 years, SIPs in debt funds are a relatively new concept. The interest in debt schemes can be gauged from the fact that the first half of the current financial year saw an addition of 3.47 lakh folios despite the turmoil in the debt market in the second quarter.
?There are a few all-weather medium to long-term debt schemes,? said Amit Tripathi, head of fixed income, Reliance MF.
It’s mostly the large fund houses advising investors to take the debt SIP route, according to industry observers. Some of the fund houses with a large debt asset include Reliance MF, ICICI Prudential MF and Birla Sun Life MF. Investing in debt funds through SIPs is suitable for long-term bond funds, say market watchers.
Experts believe investing through SIPs may help mitigate the interest rate risk to some extent. ?SIPs in debt funds will help investors get an average yield rather than run the risk of locking in at lower yields at any point of time,? said R Sivakumar, head, fixed income, Axis MF.
Despite these benefits, fund houses concede it will be tough to convince investors to use SIP route to debt schemes.
Market observers believe these SIPs may not work if the investment horizon is less than 3 years or if the interest rates rise in the investment period. ?If there is a sustained rise in interest rates, then on every rise, preceding investment will be at a loss,? said Sunil Jhaveri, MSJ Capital & Corporate Services chairman.