It was 8th November 2016, when Prime minister Narendra Modi, made the announcement on the Demonetization of Rs 500 and Rs 1000 notes, and since then Investment markets have been showing different colors. Where Equity markets are facing the jitters, debt market has been rising consistently.
With the increasing deposits base of banks which in turn is expected to impact positively on government borrowing program and deflationary economy, yields on government securities have fallen sharply in last few days. Bank deposits rates are also impacted with almost all banks have cut down their 1-2 years bank FD rates.
In last 14 days where Sensex and Nifty have delivered negative 6-7% of return, there long-term gilt funds have delivered positive 3-4% of the absolute return.
Long term debt funds and G-Sec yields
And the reason is this…the falling G-sec yields.In the below image you can clearly see the fall in last 3 years and also, the overall trend. In the last 10 years, it has once even touched 5% somewhere in 2009.
What is the point?
You must be thinking that what do I really want to convey. Am I anywhere advising you to get into long term debt funds now or want you to reduce the exposure from equities?
See, this is not the first time I am telling you the importance of long term debt funds in your portfolio. I told you this when I wrote on being friends with volatility in case of small saving schemes when I wrote on Asset allocation when I wrote on how you can protect yourself from stock market fall.
It’s all about having exposure to all asset classes, with a proper diversification within the same.
The whole point is to remind you of the importance of Asset allocation, and what should be a perfect investment portfolio look like.
(Featured Image Source : kiplinger.com)
