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Term of the Week

Types of debt mutual funds: Low Duration Funds

Oct 25, 2018

Low duration funds invest in debt and money market instruments of a certain duration profile, such that the portfolio’s Macaulay Duration is between 6 to 12 months. The term structure of interest rates, popularly known as the yield curve, is usually upward sloping. This means that longer duration debt or money market... Read More

Yield to Maturity

Oct 25, 2018

Along with bond duration, Yield to Maturity is one of the most important concepts of fixed income investments. Yield to Maturity is the expected annualized return from your bond investment, if you hold the bond till its maturity. The equation for calculating yield to maturity (YTM) is as follows... Read More

Types of Debt mutual funds: Ultra-short duration funds

Oct 25, 2018

Ultra-short duration funds are money market mutual funds, which invest in money market instruments (commercial papers, certificates of deposits, treasury bills etc) of a certain maturity / duration profile, such that the Macaulay Duration of the fund portfolio is between 3 to 6 months. Longer dated papers gives... Read More

Bond duration: Macaulay and Modified Duration

Oct 25, 2018

Duration is one of the most important concepts of fixed income investments. Bond prices have an inverse relationship with interest rate changes; bond prices go up when interest rate falls and vice versa. Duration is a measure of the sensitivity of a bond’s price to interest rate changes. There are two analytical... Read More

Types of Debt Mutual Funds: Liquid Funds

Oct 4, 2018

Liquid mutual funds are money market mutual funds, where the residual maturities of portfolio securities do not exceed 91 days. Liquid funds invest in securities like commercial papers, certificates of deposits, treasury bills etc. Like overnight funds, liquid funds have virtually no interest rate risk and are highly liquid... Read More

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