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Updated January 11th, 2024 at 17:35 IST

Why choose target maturity funds for stable returns?

Target maturity funds attract conservative investors by providing a viable and lower-risk option within the debt component of their portfolio.

Business Desk
Mutual fund
Mutual fund | Image:Pixabay
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Stable returns strategy: Are you seeking a reliable investment strategy? Target maturity funds, a type of debt mutual funds, are considered a prudent choice for investors seeking a moderate level of return predictability, say experts. These funds primarily invest in government bonds, holding them until maturity, with the interest income from the bonds being reinvested during the fund's tenure.

Target maturity funds operate as passive debt mutual funds, tracking an underlying bond index to manage risks associated with debt investments. The fund's portfolio consists of bonds aligned with the stated maturity of the fund. The investment focus includes government securities, PSU bonds, and state development loans (SDLs), resulting in lower default risks compared to other debt mutual funds.

Why choose target maturity funds

Investors are drawn to target maturity funds for several reasons. Firstly, they cater to conservative investors, particularly those inclined towards the debt component of their portfolio. For individuals seeking lower-risk options, target maturity funds offer a viable choice. Additionally, these funds allow investors to stay committed throughout the fund's tenure, enabling them to meet financial goals without committing their investments for an extended period.

Unlike fixed maturity plans, target maturity funds are open-ended, providing investors with the flexibility to exit at their convenience. This flexibility is particularly appealing to retail investors who maintain a balanced portfolio with exposure to both equity and debt. In summary, target maturity funds offer a balanced approach to risk and returns, making them an attractive option for investors seeking stability and flexibility in their investment strategy.

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Published January 9th, 2024 at 21:16 IST

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