Are Your Debt Fund Risk Free?
Lately one of the clients asked me to switch his portfolio from equity dominancy to debt. Though his reaction was obvious as the equity market has been hyperactive recently. Though after good discussion it was concluded that the client wasn't much comfortable with the fluctuation of the equity market. Hence, his portfolio allocation has to be rebalanced as per his risk appetite. What was more important here was to get the client's expectation right regarding the debt fund and risk associated with them. Most of the time investors come with the notion that debt funds are risk-free and it becomes important to clear this could of at the very beginning that nothing in the market is risk-free. Every asset class carries some risk along with it and as an investor one should be clear about the risk and return profile of the asset class. So in this article let us look at the key risk associated with the debt funds. 1. Credit risk in Debt Funds: One of the most obvious but