Ultra short term debt fund

Q & A Forum › Category: Mutual Funds › Ultra short term debt fund

Deepak asked 8 years ago

Thanks for your informative blog. I want to invest 3 lakh for my SIPs upto next 1 .5 (one and half ) years through SWP route. For lumpsum amount ,which Debt fund is preferable ,why ? A) Ultra short term debt fund from well established AMC Which Gave 8% return last year But investing in 40 % in AAA papers, 40 % in AA papers ,and 20 % in A & below papers. Franklin India ultra short bond fund super institutional plan B) Ultra short term debt fund from well established AMC Which Gave 7 % return last year Investing in 70 % in AAA papers, and 30 % in AA papers. C) Liquid fund which Which Gave 6 % return last year Thanks.

3 Answers

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Sreekanth Staff answered 8 years ago

Hi, Is it for SWP or STP to Equity funds? May I know your investment objective? Also, the returns from debt funds may not be fantastic going forward in the near future. RBI has given signs that interest rate cycle may reverse and can expect some up-tick.

Deepak replied 8 years ago

Thanks for reply.
It is SWP because I had to invest in 4 funds with 4 different AMCs.So,Instead of investing into 4 different debt funds, I preferred next 1.5 years SIPs through SWP route rather than STP for my convenience.

Investment objective is for 10 + years. But I am hesitant to invest whole amount upto 1.5 years as a lumpsum.

So,I decided this.
Which option would you suggest for this among above 3 ?
Thanks.

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Sreekanth Staff answered 8 years ago

Hi, I believe all most all platforms now offer auto-setup for STPs. But, if this route is convenient for you then kindly go ahead. If I am in this kind of situation, I will invest in couple of liquid funds and then Set-up STPs to couple of Equity funds. If you insist me to pick an option, you may go ahead with a Liquid fund.

Deepak replied 8 years ago

Thanks for you reply.
1)kindly tell what is “auto set up for STPs “.
Does mfutility provide this ?
2)Do you see any disadvantage of choosing ‘SIPs through SWP’ rather than ‘SIPs through STP ‘ route.
Kindly tell me ,so I can act accordingly.
3)Do you see ultra short term debt fund risky for this purpose ?
If I have already invested some part into ultra short term fund like” Franklin India ultra short bond fund super institutional plan”,
Should I redeem it, and invest it into liquid fund for this purpose ?
Thanks.

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Sreekanth Staff answered 8 years ago

Dear Deepak, 1 - I mean, an investor has to just set-up the STP and the rest is taken care by the online platforms. I believe that MF Utility do provide STP option (but I do not have real-time exp). 2 - It is just a matter of convenience. There are no disadvantages. Kindly note that SWP/STPs are treated as normal redemptions and tax implications (if any) would remain same on the realized capital gains (if any). Kindly read : https://www.relakhs.com/mutual-funds-capital-gains-taxation-rules-fy-2018-19/ 3 - In terms of risk profile, Liquid funds are safer than Ultra short term debt funds. So, it depends on whether you are willing to take that extra risk to get some extra basis points as returns (if any).