Long-duration funds: 6-12 months for tactical, 10+ years for long term

Those with a medium-term horizon run the risk of getting caught in a rising rate cycle

Long-duration funds have outperformed all other debt fund categories over the past year, delivering an average return of 9.8 per cent. Investors need to understand the risks in these funds and choose an appropriate investment horizon.

 

Invest largely in G-Sec
 

According to the Securities and Exchange Board of India (Sebi) regulations, these funds must have a duration of more than seven years. 
 

“Most of these funds invest a major percentage of their portfolios in government bonds or in state development loans (state government securities) as corporates in India generally do not issue significant amounts of long-dated bonds,” says Devang Shah,