What Should Be Your Holding Period In Debt Funds?

The most common refrain that investors have for the debt component of their portfolios, in these times when interest rates are moving up, is what is appropriate. Since interest rates and bond prices move inversely, returns will be adversely impacted when bond yields move up in the secondary market. Sometime earlier, floating rate funds were popular and were considered an elixir for rising interest rates because it was expected that the Reserve Bank of India will hike interest rates and people drew a one-to-one correspondence that as and when interest rates move up, floating rate fund returns would move up too. At present, however, that idea is waning as recent returns from floating rate funds have not been as good as expected in spite of rising bond yields in the secondary market. One must note that nothing has changed fundamentally in the way floating rate funds are run. There was a...