Further, debt fund SIPs can be used for an investorвЂ™s financial planning. Investors also have the opportunity to lower their average cost of investment, known as rupeeД¬ost averaging, by investing through SIPs.

Is where SIPs can play an important role as regular SIP investments negate the need to time the market across different interest rate environments. They might miss most of a market phase, landing up entering or exiting at the fag end of phases and missing superior gains. It is difficult for individual investors to take the right call on when to invest as per the interest rate scenarios. Systematic investment plan (SIP) вЂ“ the best route to beat volatility Meanwhile, dynamic bond funds can move across the maturity spectrum, based on the interest rate in the underlying market. Their strategy is to mitigate credit risk and generate returns through a blend of accrualsДЄnd active duration management. Most of the schemes in these two categories aim to maintain an optimal balance of yield, safety, and liquidity.

Similarly, banking and PSU debt funds invest 80% of their assets in debt instruments of banks, PSUs, public financial As a result, these funds are less exposed to interest rate volatility. Mostly of shorter duration and are held until maturity. They normally follow the accrual strategy, aiming to generate returns through the accrual of interest on bonds, which are CorporateД«ond funds invest 80% of their assets in the highest-rated corporate bonds, and may invest a small portion in G-sec. These funds tend to have their maturity profile in between the long- and short-maturity funds, thus they may provide the investors with the benefit of both the worlds. For instance, they can look at medium-duration funds such as corporateД«ond funds, banking and PSU debt funds, and dynamic bond funds. Investors can instead allocate their money to different debt fund categories of varying maturity. Source: RBI, CRISIL Ride interest rate cycles through debt mutual fundsД®ven seasoned investors find it difficult to take the right interest rate call.

Distributor Initiated Transaction (DIT).

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