#IncomeFunds

[farademetre]

InvestTalk - 2-22-2023 – What Are Option-Income Funds and Are They Here to Stay?

According to one expert, in addition to paying out up to 11% per year, these funds are often less hazardous than stock market index funds.

[digimark234]

In More Detail Investment Strategy Acquisition of stabilized (or readily stabilized) real estate assets that can produce near term cash flow and long term appreciation Primarily off-market sourced transactions that keep us out of competitive bidding process Deal sizes $2M to $20M so we can stay under the larger REIT competition Sortis Holdings, Inc. provides us a strong operations team and platform of brands to enhance acquisitions through curation of retail experience Asset classes include multifamily, hotel, retail, office, light industrial and life science In the near term, we view multifamily and industrial as overbought categories. In addition, when reviewing acquisition opportunities, we turn away five deals for every one we select to do further due diligence on Click for more

[blogthetortoise-blog]

Debt Mutual Fund: Duration Funds vs Accrual Funds

A debt mutual fund holds debt instruments, and these instruments pay a particular coupon (interest). An accrual strategy is holding a bond, earning the interest due, collect the principal at maturity and reinvest it in fresh bonds. Liquid funds, ultra-short term funds, short-term debt funds, income funds and credit opportunity funds primarily follow an accrual strategy. A fund following a duration strategy seeks to gain from bond price rallies when interest rates fall. When interest rates fall, bond prices rise – since new bonds will carry a lower interest, existing bonds become more attractive and thus prices rise until yields match the new bonds. A duration fund will try to make capital appreciation from the bonds it holds. An accrual fund does not try to time the interest rate cycle. Given the rate scenario and its own mandate, it will look for those instruments that deliver an optimal yield. A duration fund, on the other hand, will estimate the direction interest rates will move and adapt the portfolio to maximize the chances of bond price appreciation. Duration potential is felt the most in government bonds (sovereign bonds or G-secs or gilts). Gilts are the most liquid debt instruments and also among the few instruments with very long maturity (10-20 years). They tend to therefore reflect rate cuts and rate cut expectations the most. Therefore, a duration fund will load its portfolio with gilts when it anticipates rate cuts. If you see a debt fund holding a large proportion of sovereign bonds, you will know that it is playing duration. These funds will have high average maturities (usually above five years). As gilts don’t pay high interest, the yield-to-maturity of these portfolios will be low. Investing in gilts is for the capital appreciation they offer and not for the interest component. An accrual fund will primarily have corporate bonds or NCDs, commercial papers, bank bonds and certificate of deposits. It will have minimal to no holding in gilts. Depending on the type of accrual fund it is the average maturity of the portfolio ranges from a few weeks to a few months to a few years. Depending on the fund, the yield to maturities will be higher than duration funds. When rates are falling duration funds delivers more than accrual. Accrual funds too use duration strategy in a falling rate scenario (as the top-rated corporate bonds they hold can be traded) to push up returns. Duration funds are inherently more volatile. As bond yields and prices fluctuate on both actual and expected rate action, the NAVs of the funds will also fluctuate. Funds also actively manage the portfolio, upping or dropping the gilt holdings, adding to volatility. Apart from the volatility, the risk is that the fund gets the interest rate call wrong. These funds are generally meant for holding periods of more than two years. Accrual funds have lower volatility. But they aren’t automatically lower risk than duration. Risk in accrual funds comes in when the funds hold debt instruments that are of lower quality or credit rating, called credit risk. Funds take this risk for the higher coupon such papers offer. Rating downgrades hit bond prices and thus NAVs. Defaults by shakier companies, though rare, can cause losses. So when picking an accrual fund, you need to be careful and look at the portfolio. In some accrual categories, the credit risk is more or less clear. Liquid funds stick to very short-term papers of the highest quality. Income funds are meant for holding periods of over two years and these funds take limited to no credit risk. Credit opportunity funds make it a point to take high credit risk. It gets tricky in short-term and ultra-short term funds as some take credit risk in various degrees and some do not. Duration suits investors who can take bouts of volatility in their debt fund returns. Dynamic bond funds are the best since they change their portfolio and strategy as per the rate scenario leaving little to do on your part other than sit tight. Gilt funds need timed entry and exits as duration works only on falling rates and thus suit only informed investors. Accrual suits moderate and conservative investors as they do not have much volatility and are stable. Direct plan in mutual funds Duel Benefits: How to save tax with Mutual Fund investments… Steps to choose best performing mutual funds Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 9 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata.He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’ Read the full article

[jagdish-me]

What are Income Funds?

A type of debt-oriented mutual funds, income funds offer steady and high returns. Know all about income funds – features, benefits, top funds and more.

[legalraastalr]

Income Funds are the debt mutual funds that make returns by investing in corporate bonds, government securities, debentures, etc.

[personalfn-blog]

Which Mutual Funds Can Protect and Grow Your Savings Post-Retirement? Know Here…

Imagine you're 56 and you have only a few years to retire.

Let's say, through regular savings and investments you've created a reasonable retirement corpus. But the biggest risk that can cull out a sizable chunk of your nest egg is waiting.

Unfortunately, you cannot eliminate this risk.

But, you can tackle it though proper investment planning.

This risk is INFLATION—the loss of purchasing power.

Inflation is a known evil, which even top investors cannot ignore.

"The riskiness of an investment is ... measured by the probability — the reasoned probability — of that investment causing its owner a loss of purchasing power over his contemplated holding period," quotes Warren Buffett.

Over the past couple of years, retail inflation has hovered between 4%-6%, briefly dropping to under 2% in the first half of 2017. What some may forget is that inflation was hovering over 8% between 2012 and 2014.

The uptick in inflation over the recent few months is threatening to go back to these levels.

What effect can this have on your retirement corpus?

Let's assume your total expense is Rs 4 lakh a year. It may seem less, but remember — post-retirement you will be free from the EMI burden of your home loan and other costs that were related to your work.

You��ve managed to build a corpus of Rs 1 crore by the time you are 60. To allow your corpus to grow, let’s assume you pick the best investments post retirement though the help of an investment adviser.

You manage to grow your wealth at a steady rate of 8% pre-tax over the 30 years of retirement. Post tax the growth rate of your investment works out to 6%, which is a relatively optimistic assumption.

Will your corpus be able to survive the threat of inflation?

Let’s have a look.

In the first scenario, inflation grows at the rate of 6%. Yes, this is a highly optimistic stance. We all know prices in urban areas are often much higher than what is projected.

But even with this conservative stance, how long would your retirement corpus last?

Just about 25 years, or till the time you are 85.

With Inflation at 6%, Your Rs 1 Cr. Corpus Will Last For 25 Years

(Source: PersonalFN Research)

In reality, medical costs is rising at a fast pace of about 10-12% p.a. same is the case for food and travel and most other expenses related retirement. If inflation grows at 6% over the next 30 years, your retirement corpus might well be sufficient.

But, nothing can be certain. Hence, you need to be prepared. What if inflation averaged 8% over the 30-year period?

Your retirement corpus may last just over 20 years, till the time you are 80.

With Inflation at 8%, Your Rs 1 Cr. Corpus Will Last For 20 Years

(Source: PersonalFN Research)

Our assumptions result in smooth lines. It shows that your portfolio grows gradually and your expenses grow steadily. In real life, when you plot your expenses and portfolio value, you will see two jagged lines.

There would be times where your corpus grows at just 4% over some years. In certain periods, it may even grow at 9%. Your expenses, too, will not be a smooth arithmetic progression.

In some years, due to emergencies or higher inflation or medical costs, your withdrawals could be much higher than expected. Such dips into your portfolio will reduce the life of your retirement savings.

For your corpus to survive the next 25 years or more, you need to be prepared for all exigencies.

You cannot avoid inflation. The best way to deal with it is prudent investing.

Mutual Funds are an ideal and convenient way to invest and grow your retirement savings.

But let’s make it clear, mutual funds cannot assure capital preservation — even if you invest in ultra-low maturity liquid funds. Being market-linked, the risks cannot be ignored.

Thus, it would be wise to keep some of your investments in the Public Provident Fund , Senior Citizens Savings Scheme , or other government-backed fixed income products where you can earn a decent return with a sovereign guarantee.

Many retirees are expected to hold a conservative portfolio. But many retirees can still be considered long-term investors if they have a reasonably sized corpus.

For example, even though you may be in your sixties, you may live another 20 or 30 years. Therefore, you'll still need to invest for your money to grow. But your priority needs to be income and preservation, with growth being secondary.

Thus, PersonalFN generally recommends that retired individuals allocate a higher proportion of their hard-earned money in debt instruments and relatively smaller portion towards allocation in equity and gold. For individuals who have a moderate risk profile, 10-20% can be invested in Equity, 70-90% in Debt and 5-10% in Gold.

You have to figure out how much risk you can tolerate and then create a mix of equity, debt, and cash (liquid savings) that feels comfortable.

Mutual Fund options for the aggressive investor

Like conservative hybrid funds, Aggressive Hybrid Funds (earlier balanced funds) offer a mix of equity and debt. Aggressive Hybrid Funds are allowed to invest 65% to 80% of total assets in equities and 20% to 35% in debt instruments.

Balanced Advantage Funds or even Dynamic Asset Allocation Funds can be considered. Under these schemes the allocation to equity and debt will be managed dynamically, i.e. the equity or debt exposure can vary between 0%-100%.

Aggressive Hybrid Funds and Balanced Advantage Funds have a similar risk-reward potential. Balanced Advantage Funds are better equipped to manage volatility. Here the performance of the schemes lies in the fund managers skill and ability.

Do read: Are These The Best Aggressive Hybrid Funds (Earlier Balanced Funds) For 2018?

Conservative Hybrid Funds for the moderate investor

Some hybrid mutual funds have a fundamental objective that balances preservation of assets, income, and growth, prioritized in that order. For example, the highest priority is to achieve positive returns (above zero percent); the second priority is to achieve returns at or above inflation; and the lowest priority is to grow wealth

A ‘Savings Fund’ is a type of mutual fund solution for investors seeking a steady level of income, while preserving the capital of their initial investment. To achieve this objective, Savings Funds invest about 80%-85% of their assets in low-risk investments. The balance 15%-20% of the assets is invested in equity to provide growth.

Until a few years ago, Monthly Income Plans or MIPs were a popular version of Savings Funds. Most of these schemes have now been renamed as ‘Regular Savings Funds’. The objective of MIPs is to generate regular income and outperform pure debt investments through a marginal equity exposure.

A change in tax laws gave rise to Equity Savings Fund. The end use is similar to Regular Savings Funds, but differs in asset allocation.

The regulator classified MIPs as Conservative Hybrid Funds. Under these funds, the investment in equity will be between 10%-25% of total assets and for debt instruments will be between 75% -90% of total assets. Erstwhile MIPs now have Conservative Hybrid, Regular Savings, Hybrid Debt or Debt Hybrid in their scheme names.

Equity Savings Funds take a hedged equity exposure (with arbitrage opportunities) up to a maximum of 60%-75% of their portfolio. The unhedged equity exposure is around 15%-25% and the balance is held in debt instruments. Being equity-oriented, with a net equity exposure in excess of 65% towards equity, these funds enjoy the same tax benefits like any other equity scheme.

Both Regular Savings Funds and Equity Savings Funds are riskier than pure debt funds because of their equity component. While both offer the opportunity to earn higher returns than those from pure debt funds, the return may be lower if the equity component performs poorly.

If you are in the age group of 60-70, consider Hybrid Funds with a marginal exposure to equity. Equity investments are volatile, but they have the ability to generate inflation-beating returns through dividends and capital appreciation.

Investing In Fixed Income Funds

When building a portfolio of mutual funds, the term fixed income generally refers to the portion of the portfolio consisting of funds that are relatively low in market risk and these pay an interest to the investor to generate income.

The overall idea for the fixed income investment strategy is to generate stable and predictable returns.

Since the general fixed income strategy is to generate a reliable source of income, investment types can include bonds, money market instruments, Certificates of Deposit (CDs) and/or various types of annuities for the fixed income portion of your portfolio.

Compared to banks FDs and some small saving schemes, investing in debt mutual funds can prove more rewarding and tax efficient. But you ought to take enough care when selecting winning debt mutual fund schemes for your investment portfolio, because debt funds aren't risk-free.

Unlike fixed deposits , where the rate of interest is known before investment, debt mutual funds diversify your investment over money market securities such as commercial papers and certificate of deposits, government securities, corporate bonds or corporate deposits. The allocation to these securities depends on the investment objective of the scheme.

Post retirement, you may consider short-term debt schemes invest in maturity assets of up to 1 year or more. Here the returns, though higher, may be more volatile than liquid schemes. Over a period of 2-3 years, most short-term debt schemes have the potential to deliver a higher return than bank FDs.

To conclude…

It's clear that planning for your post-retirement phase of your life is a lot more different than planning for the pre-retirement period.

You need to maintain liquidity and keep risks low with your investments while simultaneously ensuring that you earn sufficient returns so that you can comfortably live your retired life.

If you are already holding a mutual fund portfolio, timely reviewing the portfolio is highly recommended. PersonalFN can help you with that and offer you advice on how to align your investments with your retirement needs.

If you need research-backed recommendations to select the best mutual funds for your portfolio, you can access 7 high-performing, time-tested readymade portfolios with a decade-long market-beating track record.

PersonalFN’s model mutual fund portfolio service ‘FundSelect Plus’ has completed a decade and we are offering subscriptions at a massive 75% discount!

Apart from four equity-oriented portfolios, you get access to three readymade debt mutual portfolios. The debt portfolios have been formulated using the investment tenure as the cornerstone. Depending on your investment horizon, which could be anywhere from less than 3 months, 3-12 months, or more than 12 months, you can choose the portfolio of your choice.

PersonalFN’s track record speaks for itself, as all three portfolio have comfortably overachieved their respective benchmarks. Don’t miss out on special offers. Subscribe now!

Author: Jason Monteiro

This post on " Which Mutual Funds Can Protect and Grow Your Savings Post-Retirement? Know Here…   " appeared first on "PersonalFN"

[digimark234]

Sortis sponsors and manages the Sortis Income Fund (“SIF”), an un-leveraged, evergreen investment fund focused on the acquisition of senior loans collateralized by real estate in the US with a focus on Western US markets. SIF’s disciplined approach and rigorous risk management results in a diversified loan portfolio generating stable, high yielding fixed-income returns for investors, all without the use of leverage. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Real Estate Investment Trust (“Sortis REIT”), a non-traded perpetual real estate investment trust focused on the acquisition of core and core plus real estate assets. The Sortis REIT uses creative sourcing and hands-on management resulting in a diversified asset portfolio generating stable cash flows with longterm appreciation. The private REIT vehicle allows Sortis to provide cash flow in a tax advantageous manner and allow exposure to real estate equity as a hedge to inflation. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

REAL ESTATE We have an uncanny ability to read the markets, anticipate emerging and enduring trends, and direct our investments to unique projects positioned to generate excellent risk-adjusted yields. We believe our track record reflects our expertise across a broad range of asset classes — retail, multi-family, hospitality, light industrial, life sciences, and assisted living — and our ability to bridge economic cycles while mitigating risk. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Income Fund (“SIF”), an un-leveraged, evergreen investment fund focused on the acquisition of senior loans collateralized by real estate in the US with a focus on Western US markets. SIF’s disciplined approach and rigorous risk management results in a diversified loan portfolio generating stable, high yielding fixed-income returns for investors, all without the use of leverage. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Real Estate Investment Trust (“Sortis REIT”), a non-traded perpetual real estate investment trust focused on the acquisition of core and core plus real estate assets. The Sortis REIT uses creative sourcing and hands-on management resulting in a diversified asset portfolio generating stable cash flows with longterm appreciation. The private REIT vehicle allows Sortis to provide cash flow in a tax advantageous manner and allow exposure to real estate equity as a hedge to inflation.Click for more#SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

REAL ESTATE We have an uncanny ability to read the markets, anticipate emerging and enduring trends, and direct our investments to unique projects positioned to generate excellent risk-adjusted yields. We believe our track record reflects our expertise across a broad range of asset classes — retail, multi-family, hospitality, light industrial, life sciences, and assisted living — and our ability to bridge economic cycles while mitigating risk. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Income Fund (“SIF”), an un-leveraged, evergreen investment fund focused on the acquisition of senior loans collateralized by real estate in the US with a focus on Western US markets. SIF’s disciplined approach and rigorous risk management results in a diversified loan portfolio generating stable, high yielding fixed-income returns for investors, all without the use of leverage. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Real Estate Investment Trust (“Sortis REIT”), a non-traded perpetual real estate investment trust focused on the acquisition of core and core plus real estate assets. The Sortis REIT uses creative sourcing and hands-on management resulting in a diversified asset portfolio generating stable cash flows with longterm appreciation. The private REIT vehicle allows Sortis to provide cash flow in a tax advantageous manner and allow exposure to real estate equity as a hedge to inflation. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Income Fund (“SIF”), an un-leveraged, evergreen investment fund focused on the acquisition of senior loans collateralized by real estate in the US with a focus on Western US markets. SIF’s disciplined approach and rigorous risk management results in a diversified loan portfolio generating stable, high yielding fixed-income returns for investors, all without the use of leverage. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity

[digimark234]

Sortis sponsors and manages the Sortis Real Estate Investment Trust (“Sortis REIT”), a non-traded perpetual real estate investment trust focused on the acquisition of core and core plus real estate assets. The Sortis REIT uses creative sourcing and hands-on management resulting in a diversified asset portfolio generating stable cash flows with longterm appreciation. The private REIT vehicle allows Sortis to provide cash flow in a tax advantageous manner and allow exposure to real estate equity as a hedge to inflation. Click for more #SortisIncomeFund #RealEstateInvesting #Realestate #Incomefund #investment #Privateequity