Till Debt do us Part

October 17, 2019

Private Equity, Venture investing, Stocks, etc.. all forms of equity investing is sexy to talk.. in fact it is common to hear people talk of 3 figure returns on some of these investments as well. However the fact of the matter is that Equity is a risky asset and the returns are not uniform across the board and all people do not make returns by investing in equity since each one is also reacting to the asset in his own way.. selling when the stocks go down and buying when they go up etc.. However we are all mesmerized by the 3 X returns that someone has made and hope we will also make similar returns.


So what is the asset class that has generated the largest pool of returns to the largest group of Investors in India, it  is by far unchallenged  that it is DEBT, the humble Savings accounts, Fixed Deposits, PPF etc. These classic debt instruments attract huge investments from both the rich and not so rich. Yet Debt is not viewed as good as an equity is when planning an investment. At a broad level you should expect to make about 7-8 % per annum at best in Debt investing. 


Esp Debt Mutual Funds with their 3 year long term taxation rule are good investments if held for a 3 year term. Also with the RBIs stance of softer interest rates… has meant that the short term debt funds have a good yield to maturity based on their portfolio.  So a large portion of your portfolio esp if you are inching towards retirement, will necessary have a good share of Debt funds.


The good news is that the weighted average returns of Debt Funds and equity funds during the past 2 years would be pretty much the same, in fact I dare say that in segments like small cap, the debt

funds have a superior performance.


So on a RISK ADJUSTED RETURN BASIS, Debt  Mutual Funds are a great addition to your investment portfolio.  So what are you waiting for say “Till Debt do us Part”.














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