When most financial planners or investment advisors recommend debt funds to their clients, it appears that they are suggesting an unpopular choice. Despite being highly rated by financial experts and SEBI-registered advisors, debt funds have seen net outflows in many categories in the recent few months. This trend raises the question: Why are investors choosing to withdraw money from debt funds and instead invest in other instruments?

Why Debt Funds Must Not Be Selected With Only Recent Performance

Perhaps the issue lies in the way many investors pick financial instruments, especially mutual funds. Short-term debt funds have returned just 4.37% over the past 1-year period, while government securities or gilt funds have given a return of only 2.85%. Moreover, data from the Association of Mutual Funds of India (AMFI), the mutual fund industry’s trade body, shows that in 11 out of 16 categories, debt funds saw net outflows, meaning that more money left the funds than came in.

Continue reading this on the Jama Wealth Insights blog – How to select debt funds