Mutual Funds Analysis - Part 2

February 2nd, 2024 Latest Blogs

In this series of articles, we are analyzing Mutual Funds along with their returns as well as trying to identify key take-aways as investors. In our last blog, we had a preliminary analysis on funds classified as Equity per AMFI. 

We will continue to analyze other Mutual Fund categories in this blog. A quick recap:

  1. There are 1329 funds present in the market available for investment*. 
  2. There are 5 categories of Mutual Funds as shown in the below figure.
  3. We have seen the huge variation in returns for funds categorized under Equity segment in the last blog. 

In this blog, we will focus our attention on funds falling under the Debt category. 

These funds invest in fixed-income securities like government securities, debentures, corporate bonds and other money-market instruments. By investing money in such avenues, debt mutual funds lower the risk factor considerably for investors. In terms of operation, debt funds are not entirely different from other mutual fund schemes. However, in terms of safety, they score higher than equity mutual funds. For instance, when the market falls, the NAVs of your equity funds fall sharply, whereas in case of debt funds, the fall is not as sharp. Having said that, debt funds can offer only moderate returns, while equity funds, which are highly risky, offer high returns over longer time horizon.

Now coming to the preliminary data analysis. 

There are 468 debt funds distributed amongst 17 sub-categories. 

(Do you recall the number equity funds and how many sub-categories were present ?? See below for the answer**)

The average, minimum and maximum returns for the 468 funds can be found below:

Honestly, when we did the analysis, we were surprised to see a debt fund delivering 14% returns over a 3 year, 5 year and 10 year period. On further researching about the fund, we observed the following:

The concerned debt fund is "FRANKLIN INDIA LOW DURATION FUND-SEGREGATED PORTFOLIO 2". When we visit Franklin Templeton site to see the portfolio of the fund, we realize that the fund had invested in Vodafone Idea bonds. 

Vodafone has been in trouble over the last few years and there have been many articles on a possible default on its debt. You can read the same in the link. 
Additionally, the fund is not allowing any additional purchases or redemptions to the fund. Hence, the returns presented seem to be superficial rather than actuals.

Ignoring this fund from our dataset, 

We have also summarized the returns from funds categorized as equity from our last blog

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