Many mutual fund investors are resigned to their fate as the market continues to be in a free-fall mode on the back of a slew of negative news: coronavirus scare, oil price war, YES Bank scam, and so on. However, some investors would be surprised to note that five mutual fund categories in their portfolio are shining brighter in these bleaker times. These mutual fund categories are offering double-digit returns. In some cases, very high double-digit, to be precise.
Here are the five mutual fund categories that are offering double-digit returns in the last one year.
Topping the return chart in one year is the gold funds’ category. The category has offered over 35% returns in one year, with 12 schemes offering individual returns of over 35%. The topper in the category is Invesco India Gold ETF. It is offering over 38% returns in one year.
Gold funds are considered good diversifiers and mutual fund advisors believe that investors should have 5-10% of their portfolio allocated to these schemes. In uncertain times like these when the equity market is going through a rough patch, these schemes can act as a hedge to your portfolio. However, advisors also ask investors to not go overboard with these schemes.
Second, on the list are Long Duration Bond Funds. This category saw a rally in the latter part of 2019 till the RBI held the rates in its MPC meeting in February 2020. Many market analysts had said that these schemes might not generate similar double-digit returns this year. However, with global uncertainties pushing the rates down across the world, these schemes are likely to benefit. The dip in crude oil prices has led to falling in the 10-year g-sec which helped the longer duration bonds. Even when the debt market is struggling with the Yes Bank woes, this category is giving above 19% returns in one year. Nippon India Nivesh Lakshya and ICICI Prudential Long Term Bond Fund are the toppers in the category with 21% and 18% returns in one year respectively.
Gilt funds have also benefited by the dip in yields and on hopes of a rate cut by RBI. Many market pundits are expecting RBI to follow US Fed and cur rates. Most of the analysts believe that the rate cut can be more than 25 bps. This is pushing the Gilt categories (both 10-year and below 10-year). The Gilt with 10-year Constant Duration category has offered 16.88%, while the below 10-year Gilt category has given 14.64% returns in one year.
The next one is a category that has been on the recommendation list of advisors for a long time now- Banking and PSU Debt Funds. Both mutual fund managers and advisors believe that this category forms a good alternative to credit risk funds with a more stable portfolio and less volatility. This category has offered 10.69% returns in one year. The topper in the category, Edelweiss Banking, and PSU Debt Fund, is offering 15.91% returns in one year.
(With inputs from economic times)