The best medium and long-term funds to invest in August 2024

Mutual fund managers and advisors are urging conservative debt investors to stick to the “safer” short-term debt funds such as overnight funds, liquid funds and short duration funds, among others. That may explain why most mutual fund investors are unaware of the existence of medium to long duration debt. mutual funds.

According Sebi Rules: Medium and long-term funds have the mandate to invest in debt and money market instruments So the duration of Macaulay’s portfolio is four to seven years. Since these schemes invest in long-term debt instruments, they are considered risky. Even a small upward movement in interest rates could make these schemes extremely risky and volatile. In simple terms, investors could lose money in such a scenario. That explains why advisors do not talk about these schemes often. Needless to say, investors should be extremely cautious about these schemes in the current scenario.

Long-term debt schemes are extremely sensitive to interest rate Investors lose money when interest rates rise, while when they fall, they benefit the most. According to investment experts, when investing for a long period in debt instruments, an investor is forced to go through an interest rate cycle that would have an upward and a downward phase. This means that the investor can experience a lot of volatility and sometimes losses when interest rates start to tighten or rise. Needless to say, the opposite scenario could benefit investors.

Investment advisors believe that many conservative investors would not be able to go through turbulent phases. Investors can avoid this only by timing their entry and exit from long-term debt funds well. Many investors would find it difficult to predict interest rate movements and enter and exit funds. That explains the advice to stick to short-term funds.

However, this does not mean that you should not familiarize yourself with the medium and long duration category. Those with risk appetite and a long investment horizon can invest in these schemes with the help of competent mutual fund advisors. The only basic requirement is that you should be aware of the additional risk involved in these schemes. Here are our recommended medium and long duration debt funds.

There are no changes to the list this month. All plans performed well. Follow our monthly updates to keep track of your investments.The best medium and long-term debt funds to invest in August 2024
Methodology:
If you want to know our methodology, you can take a look.
ETMutualFunds.com has used the following parameters to select the debt mutual fund schemes.

1. Moving average returns: Filmed daily for the past three years.

2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.

ii)When H < 0.5, the series is said to have mean reversion.

iii) When H > 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.

3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside risk = square root of Z

4. Superior performance: Fund performance: benchmark performance. Daily cumulative returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.

Asset size: For debt funds, the limit asset size is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)