Should you invest in Nippon India Nivesh Lakshya?

Long-term passive debt investors who are undisturbed by near-term mark-to-market losses could invest in Nippon India Nivesh Lakshya Fund in a staggered manner.Financial planners point out that most retail investors predominantly have allocation to rotating maturity profile products like bank deposits and non-convertible debentures (NCDs) with maturity of one to five years, which leads to reinvestment risk. Over the last one year, fixed income product investors receiving maturity proceeds have been grappling with lower interest rates.“To diversify the overall portfolio, one should have allocation to long-term maturity profile products that do not get impacted by interest rate movement and are in line with long-term goals like retirement planning,” says Sachin Jain, analyst, ICICI Securities. He recommends this fund to investors who want to meet their goals that are 20 years away. Given that interest rates could be volatile in the near term, he suggests a staggered investment using the systematic investment plan (SIP) route over the next one or two years. With the gross yield of the fund at 7%, investors could earn a post-tax return of 6% net of expenses and taxes. These returns compare favourably over tax-free bonds that currently yield 4.5%, or the Reserve Bank of India’s floating bonds that yield 5% post-tax.Financial planners believe it is a good fit for investors who don’t want any credit risk over the long term and the nuances of tracking it in fund portfolios. “The fund invests only in government paper, thus eliminating credit risk,” says Amol Joshi, founder, Plan Rupee.Due to volatility in fixed income market over the last one year with the 10-year benchmark moving from 5.79% to 6.22%, investors have seen mark-to-market losses. They have lost 3.21% over the last six months and 0.44% over one year. However, they have gained 11.16% over a three-year period.The fund invests in a mix of government bonds with a maturity of 23-25 years and follows a rolldown strategy, which means all incremental investments will continue to be made in similar securities. The securities in the portfolio will be bought and held till maturity. Currently, the fund has assets of ₹1,789 crore and the portfolio is a mix of four government bonds that mature in 2042, 2044, 2045 and 2046. 84358311

from Economic Times https://ift.tt/3kbOvqa