Winning Bizness Sports Desk
Mumbai. The interest on 10-year Government of India Security (G-Sec) has increased from 6.98% to 7.22% with effect from May 16, 2023. However, the inclusion of G-Secs in the JPMorgan Emerging Markets Bond Index is expected to provide a further boost to bond prices. Investors who want to benefit from this development should consider long-term bond funds or dynamic bond funds. Inclusion of Indian government securities in foreign indices could lead to greater inflow of funds into the Indian bond markets. Because foreign investors will need to buy G-Secs to track the indices. A report by Kotak Securities estimates that investment could reach $30 billion in the next 18 months. This will be a significant boost for the Indian bond market.
Fixed income investments are looking good right now
According to analysts, fixed income investments are looking good right now. Foreign investors may soon buy more bonds, and bond prices may rise when crude oil and US yields stop rising. Interest rates are expected to fall in 2024. This will also cause a decline in bond yields. 10-year G-Sec yields may fall to the range of 6.5-6.7% next year. Long term debt funds invest in long term bonds. These funds gain the most when interest rates fall, but they can also suffer the most losses when interest rates rise. A safe way to bet on long term funds is to have a long term horizon of more than five years. Invest in debt funds for the long term and not for short term trading gains.
Interest rates have reached to the peak
Experts have opined that interest rates are unlikely to rise beyond this, and there is a possibility that they may fall next year. Now is a good time to invest in long term debt funds. Still, downside risks will remain. Interest rates are unlikely to rise in the near future, but they may increase by small amounts. If this happens, returns on long-term debt funds may turn negative in the near term. However, there is very little possibility of a cut in interest rates in the recent term but it may happen in the long term. Long term debt funds can be included in a long term portfolio. All investors, including retirees, can consider long term debt as a part of their debt portfolio.
Dynamic bond funds can be a good option
Investors can divide their long-term wealth between long maturity bond funds and target maturity funds. Dynamic bond funds are a flexible type of bond fund that can be a good option for investors who do not have a strong opinion on interest rates or bond maturities. The fund manager can invest in different types of bonds, and they can adjust the portfolio as needed. This makes dynamic bond funds a good choice for investors who want to generate returns from their bond investments regardless of the interest rate environment. Dynamic bond funds are a good option for investors who are not concerned about interest rate cycles because the fund manager takes care of it.
