If you have been worrying about the status of your liquid funds, it may be heartening for you to know that all of them have not only erased the losses of July 16 but also gained post that.
This, despite yet another tightening measure that the RBI undertook on July 23. But most liquid funds stood their ground the second time. Hence, by July 30, 2 weeks after the first measure by the RBI, most funds had moved in to positive territory. Returns only enhanced post that as a result of the tight short-term liquidity.
The absolute gains varied from 0.1% to 0.7% between July 15 to August 5 2013. The average gains was 0.32%. Half of the about 60 liquid funds managed returns over 0.3% suggesting that most of them comfortably wiped off the losses.
As suggested by us in our article post the July 16 fall, investors can continue to hold liquid funds for contingency purposes.
Do expect some volatility but rest assured that liquid funds will cover any lost ground soon. For those who needed to withdraw the money for near term use but chose to wait for the dust to settle, please know that you have been rewarded for your patience.
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I agree with Vidya. The morale of the story is, in a tight market even liquid funds can give negative returns for a brief period. Investors should not use liquid products as a substitute for savings bank a/c. http://www.ddramanathan.blogspot.in
madam,
good to hear that the liquid funds have wiped out the losses.it is always true that patience will be rewarded.thanks for the update.
I agree with Vidya. The morale of the story is, in a tight market even liquid funds can give negative returns for a brief period. Investors should not use liquid products as a substitute for savings bank a/c. http://www.ddramanathan.blogspot.in
madam,
good to hear that the liquid funds have wiped out the losses.it is always true that patience will be rewarded.thanks for the update.
I invested in Dynamic fund in May. I’m suffering annualised loss of -16.20 %
Hello sir, why do you annualise your losses? Losses are actual. Only if the fund has crossed a year should you annualise losses or profits. The losses are much lower and it would be bad only if you had invested in funds with a long portfolio maturity such as those with high exposure to long-term gilt.
tks
Vidya
I invested in Dynamic fund in May. I’m suffering annualised loss of -16.20 %
Hello sir, why do you annualise your losses? Losses are actual. Only if the fund has crossed a year should you annualise losses or profits. The losses are much lower and it would be bad only if you had invested in funds with a long portfolio maturity such as those with high exposure to long-term gilt.
tks
Vidya
Hello Maa`m,
i have invested in SBI Dynamic Bond Fund and IDFC Dynamic Bond Fund some in 2nd Jan, 13 and rest between 09th to 22nd May 13. Totally 36,00000.
before 16th July, 13 my portfolio shows return of +165000 but as on 19th Aug 13 it shows -149000 .
From 08th August i see much panic condition as erosion of Rs.28000 to 68000 are happened on daily basis.
Kindly advice me for my investment. …also tell me does i should see some more panic situation i.e more -ve return will possible?. also give rough idea ho much time takes to atleast cover my losses if i hold it.
hello Mr Singh, the funds you are invested in have a long duration. Hence they reacted more sharply to the fall. The losses are likely to reverse in a quarter or two if things ease (that is interest rates are not hiked further) If you have a 3 year tenure in mind, you should probably not panic about this as the return potential is enhanced for the long term by the recent sharp rise in yields. Infact the yield rise has already reversed a bit yesterday and RBI’s measures announced yesterday can be expected to cause some further reversal in yields, causing long bonds to rally.
We do not see the funds you mentioned in your FundsIndia portfolio.For more queries on your portfolio with us, request you to use the ‘Ask Advisor’ feature available for all our investors in their account (click help tab to see this feature).
thanks, Vidya
Hi Vidya,
If we check return in any period upto last 5 years, Liquid bond are giving very good return in comparision to all other type of bonds… long term, gilt, short term etc. Most of Liquid funds have given return 8% to 9.5% return and other fund have given -5% to 10% return. why liquid funds are not good to keep money for 1-3 years period especially in this highly uncertain high inflation environment. Please guide.
Hello Sanjay, the last 3 years return makes averages look good because we have had a predominantly rising interest rate scenario. But if you look at periods such as 2004-07 (3 yrs) average return was just 6% annually. Even 5 years between 2004-09 delivered just 6.2%. There have been years when they delivered just 4-5% too. the fact is liquid funds have worked well in high rate scenario. But since our economy is overdue for rate correction (agreed it is not near term), you may miss out on opportunities if liquid fund is the only debt category you hold. Thanks, Vidya
Dear ma’am,
For the past few days I am thinking of a one-time investment in liquid funds. Is this the right time to do so, or you suggest me to wait for little awhile? Anyways, what is the right time to invest in such funds?
Hello Jangannath, With RBI’s policy due on Friday, debt segment is expected to be volatile. While that is unlikely to cause much trouble in the liquid segment, if you wish to, you may wait till this weekend and then invest. In general, liquid funds are short-term parking grounds and the timing should not matter. Thanks, Vidya
Hello Maa`m,
i have invested in SBI Dynamic Bond Fund and IDFC Dynamic Bond Fund some in 2nd Jan, 13 and rest between 09th to 22nd May 13. Totally 36,00000.
before 16th July, 13 my portfolio shows return of +165000 but as on 19th Aug 13 it shows -149000 .
From 08th August i see much panic condition as erosion of Rs.28000 to 68000 are happened on daily basis.
Kindly advice me for my investment. …also tell me does i should see some more panic situation i.e more -ve return will possible?. also give rough idea ho much time takes to atleast cover my losses if i hold it.
hello Mr Singh, the funds you are invested in have a long duration. Hence they reacted more sharply to the fall. The losses are likely to reverse in a quarter or two if things ease (that is interest rates are not hiked further) If you have a 3 year tenure in mind, you should probably not panic about this as the return potential is enhanced for the long term by the recent sharp rise in yields. Infact the yield rise has already reversed a bit yesterday and RBI’s measures announced yesterday can be expected to cause some further reversal in yields, causing long bonds to rally.
We do not see the funds you mentioned in your FundsIndia portfolio.For more queries on your portfolio with us, request you to use the ‘Ask Advisor’ feature available for all our investors in their account (click help tab to see this feature).
thanks, Vidya
Dear ma’am,
For the past few days I am thinking of a one-time investment in liquid funds. Is this the right time to do so, or you suggest me to wait for little awhile? Anyways, what is the right time to invest in such funds?
Hello Jangannath, With RBI’s policy due on Friday, debt segment is expected to be volatile. While that is unlikely to cause much trouble in the liquid segment, if you wish to, you may wait till this weekend and then invest. In general, liquid funds are short-term parking grounds and the timing should not matter. Thanks, Vidya
Hi Vidya,
If we check return in any period upto last 5 years, Liquid bond are giving very good return in comparision to all other type of bonds… long term, gilt, short term etc. Most of Liquid funds have given return 8% to 9.5% return and other fund have given -5% to 10% return. why liquid funds are not good to keep money for 1-3 years period especially in this highly uncertain high inflation environment. Please guide.
Hello Sanjay, the last 3 years return makes averages look good because we have had a predominantly rising interest rate scenario. But if you look at periods such as 2004-07 (3 yrs) average return was just 6% annually. Even 5 years between 2004-09 delivered just 6.2%. There have been years when they delivered just 4-5% too. the fact is liquid funds have worked well in high rate scenario. But since our economy is overdue for rate correction (agreed it is not near term), you may miss out on opportunities if liquid fund is the only debt category you hold. Thanks, Vidya